The first quarter of 2022 could represent the highest level for gold prices in the next year, according to commodity analysts at Société Générale. In a report released Thursday, analysts forecast gold prices to trade around $1,900 in the second quarter. Société Générale analysts’ forecasts and expectations cryptocoin.com We have prepared for our readers.
“The perfect mix for gold”
Last month, Société Générale predicted that gold prices would rise to $1,945 in the first quarter of 2022. The bank reiterates its optimism about the precious metal as low real interest rates will continue to support prices, even as gold prices struggle through 2021. Analysts make the following assessment:
Despite Jerome Powell’s re-nomination and hawkish stance, our interest rate strategists do not expect rate hikes before Q2 2022. This, combined with our economists’ estimate of consensus inflation, points to negative real interest rates; The perfect mix for gold.
Analysts also say that investor demand for gold-backed exchange-traded products remains the critical driver for higher gold prices. They point out the limited impact of investment demand to push prices above $1,900:
ETF holdings are just 11.6% below their latest record and still much higher than the average of the last decade. This shows that investors have limited opportunities to allocate large amounts of shares in gold.
Central bank purchases could be supportive for gold prices, according to Société Générale
Leaving the first half of 2022 behind, Société Générale notes that headwinds for gold are mounting as inflation peaks and the Federal Reserve begins raising interest rates:
We expect rising real interest rates to be a strong headwind for gold only in the second half of 2022.
Société Générale estimates that a savings opportunity for the gold market could also be greater central bank reserve diversification, and predicts that central bank gold purchases will help support prices next year:
As the economic world becomes more multipolar, it becomes less important for central banks to hold USD. Central banks, especially in developing countries such as China and India, have a low share of gold reserves compared to western economies, and a partial catch up would greatly support demand for precious metals.
2 scenarios for gold prices
SocGen’s baseline scenario is $1,900, while analysts see a 25% chance of prices falling to $1,700 or rising to $2,100. They note that these two outlooks depend on the growth trajectory for the global economy, which continues to be affected by the Covid-19 pandemic:
Our upside economic scenario is bearish for gold, as new Covid variants are effectively being combated through high vaccination rates and drug treatments. This will reduce the risk-aversion sentiment that is detrimental to gold, but more importantly, it will lead to easing of restrictions and therefore higher consumption of services. Our downside economic scenario is bullish for gold, as central banks around the world will have to keep their monetary policies highly aligned so their economies can cope with renewed Covid restrictions.
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