{"id":13407,"date":"2022-01-14T09:35:39","date_gmt":"2022-01-14T04:05:39","guid":{"rendered":"https:\/\/gjepc.org\/solitaire\/?p=13407"},"modified":"2022-01-14T09:35:42","modified_gmt":"2022-01-14T04:05:42","slug":"gold-outlook-2022","status":"publish","type":"post","link":"https:\/\/gjepc.org\/solitaire\/gold-outlook-2022\/","title":{"rendered":"Gold Outlook 2022"},"content":{"rendered":"\n<h4 class=\"wp-block-heading\"><em>Despite potential rate hikes, real rates remain low<\/em><\/h4>\n\n\n\n<h4 class=\"wp-block-heading\"><em>Gold may face similar dynamics in 2022 to those of last year, as competing forces support and curtail its performance.&nbsp;<br>Near term, the gold price will likely react to real rates in response to the speed at which global central banks tighten monetary policy and their effectiveness in controlling inflation.<\/em><\/h4>\n\n\n\n<p>Yet, in our view:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>while rate hikes can create headwinds for gold, history shows their effect may be limited<\/li><li>at the same time, elevated inflation and market pullbacks will likely sustain demand for gold as a hedge<\/li><li>jewellery and central bank gold demand may provide additional longer-term support<\/li><\/ul>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-src=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-681x1024.jpg\" alt=\"\" class=\"wp-image-13421 lazyload\" width=\"205\" height=\"308\" data-sizes=\"auto\" data-srcset=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-681x1024.jpg 681w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-200x300.jpg 200w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-768x1154.jpg 768w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-1022x1536.jpg 1022w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-1362x2048.jpg 1362w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-450x676.jpg 450w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-225x338.jpg 225w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-900x1353.jpg 900w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-1350x2029.jpg 1350w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-20x30.jpg 20w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council-64x96.jpg 64w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Juan-Carlos-Artigas_-Global-Head-of-Research_-World-Gold-Council.jpg 1703w\" sizes=\"auto, (max-width: 205px) 100vw, 205px\" \/><figcaption><em>Juan Carlos Artigas, Global Head of Research, World Gold Council<\/em><\/figcaption><\/figure><\/div>\n\n\n\n<p><strong>Juan Carlos Artigas, Global Head of Research, World Gold Council<\/strong>,<strong> <\/strong>said; \u201cThe 2022 outlook for gold comes down to which dynamics will tip the scales. While factors like persistent inflation and jewellery demand are likely to be supportive, rising rates may create headwinds. Ultimately, even if gold\u2019s price may fluctuate, its value as a highly liquid hedge remains consistent. This is an important attribute amidst ongoing Covid-related market volatility and an intensifying investor risk appetite.\u201d<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Higher rates in 2021 outweighed inflation risks<\/h4>\n\n\n\n<p>Gold finished the year approximately 4% lower, closing at US$1,806\/oz.<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#footnote-1\"><sup>1<\/sup><\/a>&nbsp;The&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/data\/gold-prices\">gold price<\/a>&nbsp;rallied into year-end on the heels of the rapidly spreading Omicron variant, likely prompting flight-to-quality flows, but it was not enough to offset H1 weakness.<\/p>\n\n\n\n<p>Early in 2021, as newly developed vaccines were rolled out, investor optimism likely fuelled a reduction in portfolio hedges. This negatively impacted gold\u2019s performance and resulted in gold&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/data\/global-gold-backed-etf-holdings-and-flows\">ETF outflows<\/a>. The rest of the year was a tug of war between competing forces. Uncertainty surrounding new variants, combined with increasing risks of persistently high inflation and a rebound in gold consumer demand, pushed gold forward. Conversely, rising interest rates and a stronger US dollar continued to create headwinds. However, dollar strength led to positive gold returns in some local currency terms, such as the euro and yen among others (<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#table1\"><strong>Table 1<\/strong><\/a>).<\/p>\n\n\n\n<p>Our&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/data\/short-term-gold-price-drivers\">gold return attribution model&nbsp;<\/a>corroborates this. Rising opportunity costs were one of the most important contributors to gold\u2019s negative performance in Q1, and intermittently in H2, while rising risks \u2013 especially those linked to elevated inflation \u2013 pushed gold higher towards the end of the year (<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#chart1\"><strong>Chart 1<\/strong><\/a>).<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Chart 1: Rates and inflation were two the most important contributors to gold\u2019s performance in 2021<\/h4>\n\n\n\n<p>Contributions of gold price drivers to periodic gold returns*Return<\/p>\n\n\n\n<figure class=\"wp-block-image alignwide size-large\"><a href=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome.jpg\" rel=\"mfp\"><img loading=\"lazy\" decoding=\"async\" width=\"912\" height=\"365\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-src=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome.jpg\" alt=\"\" class=\"wp-image-13409 lazyload\" data-sizes=\"auto\" data-srcset=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome.jpg 912w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome-300x120.jpg 300w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome-768x307.jpg 768w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome-450x180.jpg 450w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome-225x90.jpg 225w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome-900x360.jpg 900w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome-20x8.jpg 20w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome-240x96.jpg 240w\" sizes=\"auto, (max-width: 912px) 100vw, 912px\" \/><\/a><figcaption>Sources: Bloomberg, ICE Benchmark Administration, World Gold Council;&nbsp;<a href=\"https:\/\/www.gold.org\/terms-and-conditions\/#proprietary-rights\" target=\"_blank\" rel=\"noreferrer noopener\">Disclaimer<\/a><\/figcaption><\/figure>\n\n\n\n<p>*As of 31 December 2021. Our short-term model is a multiple regression model of monthly gold price returns (based on XAU), which we group into the four key thematic driver categories of gold\u2019s performance: economic expansion, market risk, opportunity cost, and momentum. These themes capture motives behind gold demand; most saliently, investment demand, which is considered the marginal driver of gold price returns in the short run. \u2018Unexplained\u2019 represents the percentage change in the gold price that is not explained by factors currently included in the model. Results shown here are based on analysis covering an estimation period from February 2007 to December 2021. On Goldhub, see: Short-term gold price drivers.<\/p>\n\n\n\n<p>On Goldhub, see:&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/data\/short-term-gold-price-drivers\">Short-term gold price drivers<\/a><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Table 1: Gold\u2019s price performance was mixed across currencies<\/h4>\n\n\n\n<p>Gold price and annual return in key currencies*<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><th>&nbsp;<\/th><th>USD (oz)<\/th><th>EUR (oz)<\/th><th>JPY (g)<\/th><th>GBP (oz)<\/th><th>CAD (oz)<\/th><th>CHF (oz)<\/th><th>INR (10g)<\/th><th>RMB (g)<\/th><th>TRY (oz)<\/th><th>RUB (g)<\/th><th>ZAR (g)<\/th><th>AUD (oz)<\/th><\/tr><tr><td><strong>2021 return<\/strong><\/td><td>-4.30%<\/td><td>3.30%<\/td><td>6.70%<\/td><td>-3.10%<\/td><td>-4.00%<\/td><td>-1.10%<\/td><td>-2.60%<\/td><td>-6.70%<\/td><td>67.70%<\/td><td>-3.40%<\/td><td>4.10%<\/td><td>1.80%<\/td><\/tr><tr><td><strong>Year-end price<\/strong><\/td><td>1,806<\/td><td>1,594<\/td><td>6,686<\/td><td>1,338<\/td><td>2,309<\/td><td>1,650<\/td><td>43,210<\/td><td>370.2<\/td><td>23,522<\/td><td>4,335<\/td><td>928<\/td><td>2,490<\/td><\/tr><tr><td><strong>Annual average<\/strong><\/td><td>1,799<\/td><td>1,521<\/td><td>6,350<\/td><td>1,308<\/td><td>2,256<\/td><td>1,644<\/td><td>42,757<\/td><td>373.1<\/td><td>15,999<\/td><td>4,263<\/td><td>855<\/td><td>2,396<\/td><\/tr><tr><td><strong>Annual high<\/strong><\/td><td>1,943<\/td><td>1,649<\/td><td>6,868<\/td><td>1,431<\/td><td>2,476<\/td><td>1,734<\/td><td>45,651<\/td><td>403.8<\/td><td>32,423<\/td><td>4,627<\/td><td>950<\/td><td>2,566<\/td><\/tr><tr><td><strong>Annual low<\/strong><\/td><td>1,684<\/td><td>1,417<\/td><td>5,885<\/td><td>1,221<\/td><td>2,125<\/td><td>1,570<\/td><td>39,730<\/td><td>353.2<\/td><td>12,396<\/td><td>3,996<\/td><td>801<\/td><td>2,194<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>*As of 30 December 2021. Based on the LBMA Gold Price PM in local currencies: US dollar (USD), euro (EUR), Japanese yen (JPY), pound sterling (GBP), Canadian dollar (CAD), Swiss franc (CHF), Indian rupee (INR), Chinese yuan (RMB), Turkish lira (TRY), Russian rouble (RUB), South African rand (ZAR), and Australian dollar (AUD).<\/p>\n\n\n\n<p>Source: Bloomberg, ICE Benchmark Administration, World Gold Council&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Looking ahead, rising rates pose risks but the devil will be in the details<\/h4>\n\n\n\n<p>As we enter 2022, the US Federal Reserve is signalling a more hawkish stance. Its projections indicate that the Fed expects to hike approximately three times<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#footnote-2\"><sup>2<\/sup><\/a>&nbsp;this year&nbsp;<a href=\"https:\/\/www.ft.com\/content\/35766dd4-7da1-4064-9e60-79a714297c5a\" rel=\"noreferrer noopener\" target=\"_blank\">at a quicker pace than previously expected<\/a>, while aiming to reduce the size of its balance sheet.&nbsp;<\/p>\n\n\n\n<p>An analysis of previous tightening cycles, however, shows that the Fed has tended not to tighten monetary policy as aggressively as members of the committee&nbsp;had initially expected.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Chart 2: The Fed signalled a more hawkish stance in the previous tightening cycle than what was delivered<\/h4>\n\n\n\n<p>Projected mid Fed funds target rate versus actual*<\/p>\n\n\n\n<figure class=\"wp-block-image alignwide size-large\"><a href=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_2.jpg\" rel=\"mfp\"><img loading=\"lazy\" decoding=\"async\" width=\"922\" height=\"363\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-src=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_2.jpg\" alt=\"\" class=\"wp-image-13410 lazyload\" data-sizes=\"auto\" data-srcset=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_2.jpg 922w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_2-300x118.jpg 300w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_2-768x302.jpg 768w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_2-450x177.jpg 450w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_2-225x89.jpg 225w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_2-900x354.jpg 900w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_2-20x8.jpg 20w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_2-244x96.jpg 244w\" sizes=\"auto, (max-width: 922px) 100vw, 922px\" \/><\/a><figcaption>Sources: Bloomberg, US Federal Reserve, World Gold Council;&nbsp;<a href=\"https:\/\/www.gold.org\/terms-and-conditions\/#proprietary-rights\" target=\"_blank\" rel=\"noreferrer noopener\">Disclaimer<\/a><\/figcaption><\/figure>\n\n\n\n<p>*As of 31 December 2021. Actual midpoint Fed funds target rate compared to Federal Open Market Committee (FOMC) member projections from the previous year. There may be up to four different end-of year projections if the FOMC members changed their expectations over the course of the year.<\/p>\n\n\n\n<p>Dot-plot projections suggest that year-ahead Fed expectations have significantly exceeded actual target rates (<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#chart2\"><strong>Chart 2<\/strong><\/a>).&nbsp;<\/p>\n\n\n\n<p>More importantly though, financial market expectations of future monetary policy actions \u2013 expressed through bond yields \u2013 have historically been a key influence on gold price performance.&nbsp;<\/p>\n\n\n\n<p>Consequently, gold has historically underperformed in the months leading up to a Fed tightening cycle, only to significantly outperform in the months following the first rate hike (<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#chart3\"><strong>Chart 3<\/strong><\/a>). Gold may have partly been aided by the US dollar which exhibited the opposite pattern. Finally, US equities had their strongest performance ahead of a tightening cycle but delivered softer returns thereafter. &nbsp;&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Chart 3: Gold has typically outperformed following the first rate hike of a Fed tightening cycle<\/h4>\n\n\n\n<p>Median return of gold, US stocks and US Treasuries over the past four Fed tightening cycles*<\/p>\n\n\n\n<figure class=\"wp-block-image alignwide size-large\"><a href=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_3.jpg\" rel=\"mfp\"><img loading=\"lazy\" decoding=\"async\" width=\"909\" height=\"357\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-src=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_3.jpg\" alt=\"\" class=\"wp-image-13411 lazyload\" data-sizes=\"auto\" data-srcset=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_3.jpg 909w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_3-300x118.jpg 300w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_3-768x302.jpg 768w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_3-450x177.jpg 450w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_3-225x88.jpg 225w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_3-900x353.jpg 900w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_3-20x8.jpg 20w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_3-244x96.jpg 244w\" sizes=\"auto, (max-width: 909px) 100vw, 909px\" \/><\/a><figcaption>Sources: Bloomberg, ICE Benchmark Administration, World Gold Council;&nbsp;<a href=\"https:\/\/www.gold.org\/terms-and-conditions\/#proprietary-rights\" target=\"_blank\" rel=\"noreferrer noopener\">Disclaimer<\/a><\/figcaption><\/figure>\n\n\n\n<p>*Median returns based on the past four tightening cycles starting in February 1994, June 1999, June 2004 and December 2015. US dollar performance based on the Fed trade-weighted dollar index prior to 1997 and the DXY index thereafter, due to data availability.<\/p>\n\n\n\n<p>Finally, while there\u2019s a lot of emphasis on the relationship with US interest rates, gold is a global market. And not all central banks may move as quickly as the Fed.&nbsp;<\/p>\n\n\n\n<p>For example, the European Central Bank has stated that&nbsp;<a href=\"https:\/\/www.reuters.com\/business\/finance\/ecb-very-unlikely-raise-rates-next-year-lagarde-says-2021-11-03\/\" rel=\"noreferrer noopener\" target=\"_blank\">it is \u201cvery unlikely\u201d that interest rates will rise in 2022<\/a>&nbsp;despite recent record inflation prints. And while the Bank of England increased interest rates in December, its&nbsp;<a href=\"https:\/\/www.ft.com\/content\/eb35ea37-fb8b-43a7-9d30-d985c58e62d7\" rel=\"noreferrer noopener\" target=\"_blank\">Policy Committee seemed to indicate only modest future rises<\/a>.<\/p>\n\n\n\n<p>The Reserve Bank of India has also signalled that it will&nbsp;<a href=\"https:\/\/rbi.org.in\/Scripts\/BS_PressReleaseDisplay.aspx?prid=52687\" rel=\"noreferrer noopener\" target=\"_blank\">maintain its accommodative monetary policy stance<\/a>&nbsp;to revive and sustain economic recovery and mitigate the impact of COVID. And the&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/gold-focus\/2021\/12\/chinas-easing-monetary-policy-paints-positive-picture-2022\">People\u2019s Bank of China cut one of its policy rates by 5bps in December<\/a>&nbsp;shortly after lowering the required commercial banks reserve ratio to cushion the country\u2019s economic slowdown.<\/p>\n\n\n\n<p>While diverging monetary policies could result in a stronger dollar, steady or decreasing rates should support regional gold investment demand.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Opinion is divided, but inflation may linger<\/h4>\n\n\n\n<p>Many central banks initially played down inflation concerns, and while some, such as the Fed, have acknowledged upside risks, there\u2019s an underlying expectation that inflation will dissipate.<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#footnote-3\"><sup>3<\/sup><\/a>&nbsp;Investors seem to be less sure, but opinions vary.<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#footnote-4\"><sup>4<\/sup><\/a>&nbsp;Anecdotally, these views were echoed in a&nbsp;<a href=\"https:\/\/www.linkedin.com\/posts\/juan-carlos-artigas-5549b44b_inflation-fed-gold-activity-6879475299201884160-zlvr\" rel=\"noreferrer noopener\" target=\"_blank\">LinkedIn poll we conducted last December<\/a>. While the vast majority expected inflation to remain high, more than one in four respondents thought it would cool down.<\/p>\n\n\n\n<p>We believe there are multiple reasons why inflation will remain high, partly stemming from the unprecedented monetary and fiscal policies put in place to alleviate the effects of the COVID-19 pandemic. In particular:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>lingering supply-chain disruptions from the initial COVID wave and subsequent dislocations as new variants continue to emerge<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#footnote-5\"><sup>5<\/sup><\/a><\/li><li>tight labour markets, which, combined with COVID fatigue, have increased the number of people voluntarily looking for new, better-paid opportunities&nbsp;<\/li><li>higher average savings from 2020, which have contributed to lofty valuations in various financial markets<\/li><li>high commodity prices.<\/li><\/ul>\n\n\n\n<p>Gold has historically&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/research\/beyond-cpi-gold-as-a-strategic-inflation-hedge\">performed well amid high inflation<\/a>. In years when inflation was higher than 3%, gold\u2019s price increased 14% on average (<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#chart4\"><strong>Chart 4<\/strong><\/a>).<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#footnote-6\"><sup>6<\/sup><\/a>&nbsp;Further, in the long run, gold has outpaced US inflation and moved closer in pace to money supply, which has significantly increased in recent years (<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#chart5\"><strong>Chart 5<\/strong><\/a>).<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Chart 4: Gold historically performs well in periods of high inflation<\/h4>\n\n\n\n<p>Gold and commodity nominal returns in US dollars as a function of annual inflation*<\/p>\n\n\n\n<figure class=\"wp-block-image alignwide size-large\"><a href=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_4.jpg\" rel=\"mfp\"><img loading=\"lazy\" decoding=\"async\" width=\"911\" height=\"363\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-src=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_4.jpg\" alt=\"\" class=\"wp-image-13412 lazyload\" data-sizes=\"auto\" data-srcset=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_4.jpg 911w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_4-300x120.jpg 300w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_4-768x306.jpg 768w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_4-450x179.jpg 450w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_4-225x90.jpg 225w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_4-900x359.jpg 900w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_4-20x8.jpg 20w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_4-241x96.jpg 241w\" sizes=\"auto, (max-width: 911px) 100vw, 911px\" \/><\/a><figcaption>Sources: Bloomberg, ICE Benchmark Administration, World Gold Council;&nbsp;<a href=\"https:\/\/www.gold.org\/terms-and-conditions\/#proprietary-rights\" target=\"_blank\" rel=\"noreferrer noopener\">Disclaimer<\/a><\/figcaption><\/figure>\n\n\n\n<p>*As of 31 December 2021. Based on y-o-y changes in US dollars for \u2018gold\u2019: LBMA Gold Price PM, \u2018commodities\u2019: Bloomberg Commodity Index and \u2018inflation\u2019: US CPI since January 1971.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Chart 5: Gold has kept up with money supply growth<\/h4>\n\n\n\n<p>Gold (US$\/oz), US M2, US CPI indexed: Q1 1971 = 100*<\/p>\n\n\n\n<figure class=\"wp-block-image alignwide size-large\"><a href=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_5.jpg\" rel=\"mfp\"><img loading=\"lazy\" decoding=\"async\" width=\"909\" height=\"356\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-src=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_5.jpg\" alt=\"\" class=\"wp-image-13413 lazyload\" data-sizes=\"auto\" data-srcset=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_5.jpg 909w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_5-300x117.jpg 300w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_5-768x301.jpg 768w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_5-450x176.jpg 450w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_5-225x88.jpg 225w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_5-900x352.jpg 900w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_5-20x8.jpg 20w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_5-245x96.jpg 245w\" sizes=\"auto, (max-width: 909px) 100vw, 909px\" \/><\/a><figcaption>Sources: Bloomberg, ICE Benchmark Administration, Oxford Economics, World Gold Council;&nbsp;<a href=\"https:\/\/www.gold.org\/terms-and-conditions\/#proprietary-rights\" target=\"_blank\" rel=\"noreferrer noopener\">Disclaimer<\/a><\/figcaption><\/figure>\n\n\n\n<p>*As of 31 December 2021. Based on US M2 cumulative growth, US CPI, and LBMA Gold Price PM USD.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Amid opposing forces, real rates will likely remain low&nbsp;<\/h4>\n\n\n\n<p>Despite potential rate hikes by some central banks, nominal rates will remain low from a historical perspective. Even more so, elevated inflation will likely keep real rates depressed (<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#chart6\"><strong>Chart 6<\/strong><\/a>). This is important for gold since gold\u2019s short- and medium-term performance tends to often respond to&nbsp;<em>real rates<\/em>, which combine two important drivers of gold performance: \u201copportunity cost\u201d and \u201crisk and uncertainty\u201d.&nbsp;<\/p>\n\n\n\n<p>Further, low interest rates \u2013 both nominal and real \u2013 are shifting investment portfolios more towards risk-on assets. And this, in turn, as we discuss in one of our recent reports,<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#footnote-7\"><sup>7<\/sup><\/a>&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/research\/increased-appetite-for-less-liquid-investments-strengthens-the-case-for-gold\">increases the need for a high-quality liquid asset such as gold<\/a>.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Chart 6: Both nominal and real interest rates are at or near historically low levels<\/h4>\n\n\n\n<p>US 10-year Treasury nominal and real yield*<\/p>\n\n\n\n<figure class=\"wp-block-image alignwide size-large\"><a href=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_6.jpg\" rel=\"mfp\"><img loading=\"lazy\" decoding=\"async\" width=\"910\" height=\"360\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-src=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_6.jpg\" alt=\"\" class=\"wp-image-13414 lazyload\" data-sizes=\"auto\" data-srcset=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_6.jpg 910w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_6-300x119.jpg 300w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_6-768x304.jpg 768w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_6-450x178.jpg 450w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_6-225x89.jpg 225w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_6-900x356.jpg 900w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_6-20x8.jpg 20w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_6-243x96.jpg 243w\" sizes=\"auto, (max-width: 910px) 100vw, 910px\" \/><\/a><figcaption>Sources: Bloomberg, Bureau of Labour Statistics, World Gold Council;&nbsp;<a href=\"https:\/\/www.gold.org\/terms-and-conditions\/#proprietary-rights\" target=\"_blank\" rel=\"noreferrer noopener\">Disclaimer<\/a><\/figcaption><\/figure>\n\n\n\n<p>*As of 31 December 2021. Real yield computed using US 10-year Treasury nominal yield minus seasonally adjusted US CPI y-o-y change.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Investors are ready to turn the page on COVID, but market pullbacks may persist<\/h4>\n\n\n\n<p>It\u2019s been two years since the start of the pandemic and the world seems ready to move on: global stock markets have strongly rebounded from their 2020 lows, albeit at different rates. But \u201ctail events\u201d have also been on the rise (<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#chart7\"><strong>Chart 7<\/strong><\/a>).<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Chart 7: Pullbacks have become more frequent<\/h4>\n\n\n\n<p>Kurtosis of S&amp;P 500 returns*<\/p>\n\n\n\n<figure class=\"wp-block-image alignwide size-large\"><a href=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_7.jpg\" rel=\"mfp\"><img loading=\"lazy\" decoding=\"async\" width=\"908\" height=\"368\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-src=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_7.jpg\" alt=\"\" class=\"wp-image-13415 lazyload\" data-sizes=\"auto\" data-srcset=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_7.jpg 908w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_7-300x122.jpg 300w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_7-768x311.jpg 768w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_7-450x182.jpg 450w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_7-225x91.jpg 225w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_7-900x365.jpg 900w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_7-20x8.jpg 20w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_7-237x96.jpg 237w\" sizes=\"auto, (max-width: 908px) 100vw, 908px\" \/><\/a><figcaption>Sources: Bloomberg, World Gold Council;&nbsp;<a href=\"https:\/\/www.gold.org\/terms-and-conditions\/#proprietary-rights\" target=\"_blank\" rel=\"noreferrer noopener\">Disclaimer<\/a><\/figcaption><\/figure>\n\n\n\n<p>*As of 31 December 2021. Two-year rolling kurtosis based on weekly returns. Kurtosis,&nbsp;<a href=\"https:\/\/en.wikipedia.org\/wiki\/Kurtosis\" rel=\"noreferrer noopener\" target=\"_blank\">the standardised fourth central moment of a distribution<\/a>, is a measure that indicates how often events in the tails of the distribution occur.<\/p>\n\n\n\n<p>Pullbacks are likely to continue in the face of the seemingly endless stream of new variants, as well as simmering geopolitical tensions and overall buoyant equity valuations fuelled by a long-lasting ultra-low-rate environment. In this context,&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/research\/investment-update-gold-efficient-hedge\">gold can be a valuable risk management tool in an investor\u2019s arsenal<\/a>. Gold has a proven historical record of mitigating the negative impact of equity market pullbacks in periods of systemic risk (<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#chart8\"><strong>Chart 8<\/strong><\/a>).<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Chart 8: Gold tends to perform well in periods of significant market pullbacks<\/h4>\n\n\n\n<p>Performance of gold, US Treasuries and S&amp;P 500 during VIX spikes*<\/p>\n\n\n\n<figure class=\"wp-block-image alignwide size-large\"><a href=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_8.jpg\" rel=\"mfp\"><img loading=\"lazy\" decoding=\"async\" width=\"910\" height=\"359\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-src=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_8.jpg\" alt=\"\" class=\"wp-image-13416 lazyload\" data-sizes=\"auto\" data-srcset=\"https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_8.jpg 910w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_8-300x118.jpg 300w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_8-768x303.jpg 768w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_8-450x178.jpg 450w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_8-225x89.jpg 225w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_8-900x355.jpg 900w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_8-20x8.jpg 20w, https:\/\/gjepc.org\/solitaire\/wp-content\/uploads\/2022\/01\/Gold-Outlook-2022-Gold-Market-Outlook-World-Gold-Council-Google-Chrome_8-243x96.jpg 243w\" sizes=\"auto, (max-width: 910px) 100vw, 910px\" \/><\/a><figcaption>Sources: Bloomberg, ICE Benchmark Administration, World Gold Council;&nbsp;<a href=\"https:\/\/www.gold.org\/terms-and-conditions\/#proprietary-rights\" target=\"_blank\" rel=\"noreferrer noopener\">Disclaimer<\/a><\/figcaption><\/figure>\n\n\n\n<p>*As of 31 December 2021. Dates used: Black Monday: 9\/1987\u201311\/1987; LTCM: 8\/1998; Dot-com: 3\/2000\u20133\/2001; September 11: 9\/2001; 2002 recession: 3\/2002\u20137\/2002; Great recession:10\/2007\u20132\/2009; Sovereign debt crisis I: 1\/2010\u20136\/2010; Sovereign debt crisis II: 2\/2011\u201310\/2011; 2018 Pullback: 10\/2018\u201312\/2018; 2020 pullback: 2\/2020\u20133\/2020. The VIX is available only after January 1990. For prior events we used realised 30-day S&amp;P 500 volatility.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Gold\u2019s performance is not only linked to investment<\/h4>\n\n\n\n<p>It is often assumed that gold\u2019s price behaviour is linked to investment demand, especially from financial instruments such as gold ETFs, over-the-counter contracts, or exchange-traded derivatives. This is only partly true. &nbsp;Shorter-term and more significant price movements do tend to respond to variables associated with these types of gold investments; for example, interest rates, inflation, exchange rates, and, more generally, flight-to-quality flows.&nbsp;&nbsp;<\/p>\n\n\n\n<p>However,&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/research\/qaurum-vs-us-real-rates-and-dollar-model\">our analysis shows that gold\u2019s performance is also linked to other components of demand<\/a>, such as jewellery, technology, and central banks. While these do not typically result in the large price movements associated with investment, they help underpin gold price performance by either providing support, or creating headwinds.<br>We believe that gold can still receive positive \u2013 if modest \u2013 support in 2022 from key jewellery markets, such as India. However, there\u2019s a chance that further Chinese economic slowdown may limit the contribution from local gold jewellery demand.&nbsp;<\/p>\n\n\n\n<p>Finally,&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/data\/monthly-central-bank-statistics\">central bank gold demand<\/a>, which rebounded in 2021, may remain an important source of demand. There are good reasons why&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/data\/2021-central-bank-gold-reserve-survey\">central banks favour gold as part of their foreign reserves<\/a>&nbsp;which, combined with the low interest rate environment, continue to make gold attractive. This was also evidenced by the fact that two developed market central banks last year joined the list of buyers which has been dominated by emerging market banks since 2010.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Gold\u2019s behaviour will depend on which factors tip the scale<\/h4>\n\n\n\n<p>Gold will likely face two key headwinds during 2022:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>higher nominal interest rates<\/li><li>a potentially stronger dollar.<\/li><\/ul>\n\n\n\n<p>However, the negative effect from these two drivers may be offset by other supporting factors, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>high, persistent inflation<\/li><li>market volatility linked to COVID, geopolitics, etc.<\/li><li>robust demand from other sectors such as central banks and jewellery.<\/li><\/ul>\n\n\n\n<p>Against this backdrop, gold\u2019s performance during 2022 will ultimately be determined by which factors tip the scale. Yet, gold\u2019s relevance as a risk hedge will be particularly relevant for investors this year.<\/p>\n\n\n\n<p>Investors can use&nbsp;<a href=\"https:\/\/www.gold.org\/goldhub\/portfolio-tools\/gold-valuation-framework\">Qaurum<\/a><sup>SM<\/sup>, our valuation tool, to analyse how the impact of some of these key drivers may influence gold\u2019s performance across a range of customisable hypothetical macroeconomic scenarios.<a href=\"https:\/\/www.gold.org\/goldhub\/research\/gold-outlook-2022#footnote-8\"><sup>8<\/sup><\/a><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><a href=\"https:\/\/www.gold.org\/download\/file\/16690\/gold-outlook-2022-.pdf\">Download the Gold Market Outlook for 2022<\/a><\/h4>\n\n\n\n<p><a><sup>1<\/sup><\/a>Based on the LBMA Gold Price PM as of 30 December 2021. It should be noted that while a closing price for the LBMA Gold Price PM is not available for 31 December, gold rallied that day. Based on XAU \u2013 a commonly used proxy for spot gold price \u2013 gold finished slightly higher and up 3% in December.<\/p>\n\n\n\n<p><a><sup>2<\/sup><\/a><a href=\"https:\/\/www.federalreserve.gov\/monetarypolicy\/files\/fomcprojtabl20211215.pdf\" rel=\"noreferrer noopener\" target=\"_blank\">Dot-plot projections from the December 2021 meeting<\/a>&nbsp;indicate a range between one and four hikes with a median of three.<\/p>\n\n\n\n<p><a><sup>3<\/sup><\/a><a href=\"https:\/\/www.ft.com\/content\/2d7d748d-5b26-41fc-be68-9b1a913f3cf2\" rel=\"noreferrer noopener\" target=\"_blank\"><em>A divide in responses to the inflation threat<\/em><\/a>, FT, December 2021.<\/p>\n\n\n\n<p><a><sup>4<\/sup><\/a><a href=\"https:\/\/www.nytimes.com\/2021\/12\/16\/opinion\/inflation-economy-2021.html\" rel=\"noreferrer noopener\" target=\"_blank\"><em>The Year of Inflation Infamy<\/em><\/a>, Paul Krugman, NYT, December 2021;.&nbsp;<a href=\"https:\/\/www.chicagobooth.edu\/review\/who-right-about-inflation\" rel=\"noreferrer noopener\" target=\"_blank\"><em>Who Is Right about Inflation?<\/em><\/a>&nbsp;Chicago Booth Review, August 2021;&nbsp;<a href=\"https:\/\/www.washingtonpost.com\/opinions\/2021\/11\/15\/inflation-its-past-time-team-transitory-stand-down\/\" rel=\"noreferrer noopener\" target=\"_blank\"><em>On inflation, it\u2019s past time for team \u2018transitory\u2019 to stand down<\/em><\/a>, Larry Summers, Washington Post, November 2021.<\/p>\n\n\n\n<p><a><sup>5<\/sup><\/a><a href=\"https:\/\/www.wsj.com\/articles\/omicron-supply-chain-troubles-to-slow-growth-world-bank-says-11641918947\" rel=\"noreferrer noopener\" target=\"_blank\"><em>Omicron, Supply-Chain Troubles to Slow Growth<\/em><\/a>, World Bank Says, WSJ, 11 Jan 2022.<\/p>\n\n\n\n<p><a><sup>6<\/sup><\/a>Based on US CPI y-o-y changes from 1971 through 2021. There have been 25 observations each of greater than and less than 3% inflation.<\/p>\n\n\n\n<p><a><sup>7<\/sup><\/a><a href=\"https:\/\/www.gold.org\/goldhub\/research\/increased-appetite-for-less-liquid-investments-strengthens-the-case-for-gold\"><em>Increased appetite for less liquid investments strengthens the case for gold<\/em><\/a>, December 2021.<\/p>\n\n\n\n<p><a><sup>8<\/sup><\/a>Qaurum<sup>SM<\/sup>&nbsp;is a web-based quantitative tool powered by the Gold Valuation Framework (GVF). An academically validated methodology, GVF is based on the principle that the price of gold and its performance can be explained by the interaction of demand and supply. In turn, demand and supply are influenced by macroeconomic scenarios that can be customised to calculate gold\u2019s implied performance based on these hypothetical conditions over various time periods. See Important information and disclosures at the end of this report.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Despite potential rate hikes, real rates remain low Gold may face similar dynamics in 2022 to those of last year, as competing forces support and curtail its performance.&nbsp;Near term, the gold price will likely react to real rates in response to the speed at which global central banks tighten monetary policy and their effectiveness in&hellip;<\/p>\n","protected":false},"author":1,"featured_media":13417,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[80,100],"tags":[],"thb-sponsors":[],"class_list":["post-13407","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-gold","category-in-focus"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Gold Outlook 2022 - 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