Gold’s price action through 2021 has been disappointing as investor demand for the precious metal has been low. However, ECB AMRO predicts that gold prices will fall 16% in 2022, which could be a disaster for the gold investor. Evaluation and analysis of the Dutch bank’s senior foreign exchange and precious metals strategist, Georgette Boele. cryptocoin.com compiled for our readers.
Pretty pessimistic scenario for gold
Strategist Georgette Boele, in her 2022 gold price prediction, predicts that gold prices will fall to $1,500 by the end of next year and to $1,300 by the end of 2023. The bearish outlook is due to the gold price failing to hold above $1,800.
Georgette Boele says that global monetary policies will be an important factor in the fall of gold next year. While the Federal Reserve has drawn most of the attention, Georgette Boele notes that many central banks are on the verge of tightening their monetary policies in 2022. The strategist notes that even pigeon central banks such as the European Central Bank are turning to tighten their monetary policies:
The ECB, Bank of Japan, Reserve Bank of Australia, Riksbank and Swiss National Bank will likely raise later than other central banks. But the direction is tightening, not easing. Tighter monetary policy is negative for gold prices in general. Because the interest rates on government bonds are also on the rise.
Returning to US monetary policy, Georgette Boele says that raising interest rates is expected to raise bond yields, especially at the front end of the curve. The strategist also thinks that inflationary pressures will ease, resulting in higher (2-year) US real returns, which will put pressure on gold prices going forward.
Georgette Boele also underlines that tighter US monetary policy will also boost the US dollar and create another headwind for the precious metal. The strategist also points out that high holdings in gold-backed exchange-traded products also pose significant risks, as weak gold prices may prompt investors to liquidate their holdings:
Currently, total known ETF positions are about 19% higher than at the start of 2020, although ETF positions have dropped from 110 million troy ounces to 98 million troy ounces.
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