Gold Outlook

Developed market central banks are nearing the end of their tightening cycles.1 For now, market consensus points to a mild contraction in the US in late 2023 and slow growth in developed markets.

The global economy is at an inflection point after being hit by various shocks over the past year. The biggest was induced by central banks as they stepped up their aggressive fight against inflation.

Investors face a challenging environment during the second half of 2022, needing to navigate rising interest rates, high inflation and resurfacing geopolitical risks. In the near term, gold will likely remain reactive to real rates, which in turn will respond to the speed at which global central banks tighten monetary policy and their effectiveness in controlling inflation.

In 2021, the 56% y-o-y rise in China’s gold consumption marked a strong comeback from 2020. 

Gold may face similar dynamics in 2022 than those from last year as competing forces support and curtail its performance. 

Interest rates will likely remain key drivers of financial assets. Gold is no exception. Yet, the negative impact of higher rates will likely be offset by the longer lasting effects and unintended consequences of expansionary monetary and fiscal policies created to support the global economy. 

The COVID-19 pandemic raised uncertainty by both compounding existing risks while creating new ones. But by the end of last year, investors were optimistic that the worst was over. 

Our new gold market outlook examines how the combination of high risk, low opportunity cost and positive price momentum looks set to support gold investment and offset weakness in consumption from an economic contraction.