February 21st, 2022

Gold’s Big Run

Dear Retail Investor,

Gold took a beating in 2021 – the precious metal finished the year down 3.6%, the worst drop since 2015 as headwinds including lower interest rates, a strengthening US dollar, surging crypto prices, and increasingly optimistic economic outlooks as Covid vaccines were rolled out put pressure on gold prices. Quantitative easing that flooded the market with cash also contributed to a “risk on” market that favored high-growth, speculative tech stocks over value stocks and steadfast “safe-haven” assets like gold.

But 2022 is shaping up to be a very different market – one which should support a prolonged gold rally, according to analysts. In early February Wells Fargo updated its price outlook for gold in 2022, setting its year-end gold price target at $2,000 – $2,100 per ounce. Wells Fargo investment strategy analyst Austin Pickle commented:

“Risks remain, including the possibility of increasing interest rates. Yet, if gold were to breach the technically and psychologically important $1,900 level, we would expect 2022 to be a very good year for gold.”

Gold did just that on Thursday this week, breaking out above $1900 before dipping slightly on Friday.

When you look at the headlines it’s not surprising investors are seeking safe haven assets. Inflation reached a 40-year high in January, supply chain issues and labor shortages continue to persist, and mounting geopolitical tensions and civil unrest are only adding fuel to the fire.

On Thursday this week the United States reported that a Russian invasion of Ukraine is “imminent”. Meanwhile the Freedom Convoy protests that began in Canada have sparked similar protests around the world. Canadian Prime Minister Justin Trudeau on Monday invoked Canada’s Emergencies Act, which gives the Canadian government the power to freeze bank accounts and transactions believed to be funneling money to the protests. This led not only to fears of a “bank run” in Canada – it also raised questions from citizens in other nations about whether their own governments might enact similar policies, and whether their own assets could be frozen against their will.

All of this has combined to make for a very skittish market, and the rotation back into ‘safe haven’ assets like gold is well underway. We believe, as many others do, that gold will perform very well in the months and potentially years to come.

We’ve spent the past few months researching a small-cap gold producer that we believe to be undervalued given its management team’s track record, its unique business model, its jurisdiction and the current macroeconomic conditions – we’ll be sharing that report with you next week.

Until next time,
Dear Retail Investors Editorial Team

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