Gold prices could easily climb to record levels in the course of 2022 thanks to the persistent presence of inflation. A trifecta of factors is converging to set the precious metal up for success according to one expert, who believes the Federal Reserve has got it wrong when it comes to inflation.
While the Fed’s stance was initially to consider inflation as being transitory, the surge has been persistent, with prices escalating across the board and reaching record highs a number of times. With ‘transitory’ no longer a viable explanation, gold is set to reap the benefits, says senior market analyst, Jim Wyckoff of Kitco.
The gold industry veteran believes that the yellow metal could ascend past its previous high of £1,474 ($2,000) because of the knock-on impact that inflation is having across the economy with the longer it persists, the stronger the case for gold. He said, “The Fed called it transitory, and that’s just not the case. It’s proving not to be transitory. It is proving to stick around for a while longer. Future inflation reports are going to be watched by gold traders. And if they continue to be hot, that’s going to support upside gold price moves.”
Suggesting that inflation is going to be a continual factor this year (which further supports the case for gold investment over the next 12 months) he explained, “When central banks were infusing money into the financial system at the rate that they were for the past couple of years during the pandemic, that caused inflation down the road. That cash was going to start chasing assets and that’s what’s happening. We are seeing price inflation, and we have supply chain issues. That’s prompted some shortages. That created an end user that wants to stockpile even more supplies which only adds to price inflation.”
Against this backdrop, the gold bulls are poised to break out with very little on the horizon to dampen the positive impact of inflation on price levels. Wyckoff says that he is bullish on gold and is already seeing momentum which suggests that greater highs are yet to come. He said, “I forecast that gold was going to experience a good year in 2022, and that has started out to be the case. I believe that trend will continue. We already hit the November high of around £1,392 ($1,890). If those levels are taken out, that’s going to give the bulls more momentum to push prices even higher.”
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Loss of risk appetite makes gold ever more appealing says investment pro
A growing disinclination to favour risk simply adds more allure to gold, with investors backing off from tumultuous equity markets in favour of the safe haven offered by the precious metal. The investment expert Peter Grosskopf, CEO of Sprott, says that 2022 is shaping up to be a challenging year for stocks, with gold shining as a less volatile, more stable store of wealth.
He said, “The stock market’s going to have a more difficult year than people expect. The Fed is now talking about doing three things in rapid succession. They’re talking about rate hikes and they’re talking about commencing a balance sheet runoff, but they’re only halfway through the first step. The odds are very low that they’re going to pull that off without some sort of market correction. The odds are quite high that we’re going to have all the right conditions for gold. And let’s not forget inflation is still running very hot.”
Grosskopf says that he is bullish on gold and expects to see a move towards new all-time highs as a result of a market correction. He predicts, “I think we see a slow-moving rally until people get worried and then we will see an explosive jump.”
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