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A new report issued this week by the German bank, Commerzbank is bullish on gold for 2022, with an expectation that prices will move to the upside over the course of the year.

Head analyst Carsten Fritsch confirms the bank is very positive on the precious metal. The report identifies a trip of factors which back its call for higher prices and growing demand thanks to soaring inflation and low real interest rates. He said, “We see upside potential for 2022. The US Federal Reserve is likely to raise interest rates. However, this will not change the environment of negative real interest rates, which is favourable for gold. This speaks for a stronger investment demand again.”

Commerzbank sees a lot of potential for gold as an inflation hedge in 2022, something that is significant giving the record breaking rates we’re seeing. As of this morning (Wednesday) for example, it was confirmed that the UK’s level of inflation hit 5.1% in November, the highest it has been in 10 years. This is great news for gold which could enjoy bumper prices as a result of this economic environment.

Fritsch added, “The coming year is likely to be dominated by the question of how the central banks react to the significant rise in inflation rates. In the US, inflation is currently at a 39-year high of 6.8%, in Germany at more than 5%, the highest level in 29 years, and in the Eurozone at 4.9%, the highest since the start of the monetary union in 1999. The Fed and most other central banks have so far classified the strong rise in inflation as transitory and intended to take their time with the exit from ultra-loose monetary policy. However, market-based inflation expectations in the US rose to around 2.7% in November after the unexpectedly high inflation rate was published.

“This means that market participants do not expect inflation to return to the Fed’s 2% inflation target in the medium to long term. Should the higher inflation become entrenched and the central banks fail to react appropriately to it, gold would probably benefit from this as an inflation hedge. According to a study by the World Gold Council, gold stands out with its price performance in phases of high inflation (inflation >5%). Even with inflation rates between 2% and 5%, the performance of gold is still significantly positive.”

It is unimaginable that inflation will quickly subside given how hot it has run all year, meaning the conditions are optimal for gold to gain in 2022. Lock in your investment now.

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