Outlook for Gold Stocks in 2022
What do civilizations of the past have in common with today? They’re still obsessed with gold.
Gold is one of the most recognized currencies in world history.
Although you’re unlikely to see people buying goods with gold coins today, the yellow metal is still a highly valuable commodity.
Whether it’s being used in jewelry, electronics, or being forged into physical coins and bars, gold remains popular in modern society.
Because of its historic value, investors turn to gold as a hedge against inflation and market turmoil.
But not all gold investments are the same.
Whereas some investors prefer physical gold, others prefer gold mining stocks.
The main difference between these two types of gold investments is that physical gold can be costly to store and hold.
The other key differentiator between stocks and physical assets is that the price of gold doesn’t necessarily connect to the price of gold stocks.
Gold stocks are an investment into a company that mines gold.
Before the next year starts, let’s take a look at how gold did in 2021, and what to know about gold stocks’ outlook in 2022.
Gold Demand in 2021
Other than being a rare metal that holds some unique properties, you might wonder where the demand for gold is coming from.
Approximately 50% of gold demand today comes from the jewelry industry.
Another 40% comes from investments in physical gold, such as bullion, coins, bars, and more.
The remaining 10% comes from industrial use of the yellow metal.
Throughout 2021, demand for gold fluctuated.
In Q1 of 2021, gold demand reached 815.7t, which was consistent with Q4 of 2020, but down 23% compared to Q1 2020.
In Q2 of 2021, gold prices managed to increase by about 4% as inflation fears pushed investors to seek a safe haven.
Experts credited lower nominal interest rates and a weaker US dollar for this gain.
But in Q3 2021, gold demand sank 7% to 831t when compared to the same quarter in the previous year.
The drop in demand is likely due to the number of investors flowing out of ETFs compared to the inflow we saw in Q3 of 2020.
There was also a significant drop in demand for gold used in jewelry, technology, and coins and bars.
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Gold Stocks After the COVID Pandemic
One universal truth about gold is that investors use it as a hedge against inflation and hard economic times.
But how does gold fare in prime economic conditions?
As we’re seeing, gold prices tend to take a hit during stable economic conditions or in recovery periods.
With most of the world well into its recovery after the emergence of Covid in March 2020, investors have begun to shy away from the precious metal.
Back in 2020, gold rallied early, nearly reaching new highs.
Investors saw that economic conditions were likely to decline, so they flocked to the gold market for protection.
Fortunately for the world, but unfortunately for gold investors, economies were able to bounce back, making gold investments less attractive.
Yet even in good conditions, gold investment isn’t a bad idea—especially if you plan to hold it.
After all, low prices are the best time to buy, especially when you don’t know what the future holds.
India: A Big Gold Market
India is one of the biggest influences on the gold market.
From weddings to festivals, the people of India use gold as a gift, jewelry, and decoration.
Unfortunately, the COVID-19 pandemic put a halt to gatherings in India, resulting in a 35% drop in demand for gold compared to 2019.
But the expectations for fall 2022 are giving investors something to look forward to.
The fall season in India is big for weddings and festivals, so the expectation is for gold demand to surge again.
At the end of Q2 2021, gold demand in India rose 47% compared to the same period a year earlier.
With all of the cancellations and delays of last year, there’s no doubt the people of India cannot wait to get their celebrations underway.
And if you’re a gold investor, you can’t wait either.
Gold Price Forecast 2022
2021 has been rife with price volatility for gold.
After reaching all-time highs in 2020, investors pulled back in 2021 as economies recovered.
If you’re wondering how gold stocks will perform in 2022, expect more of the same.
Although most developed countries have bounced back from pandemic turmoil, some less developed countries have not.
As the Delta and now Omicron variants of COVID-19 continue to spread and make vaccines less effective, even developed countries are under threat.
Analysts seem to be all over the place regarding where they think gold prices will be in 2022.
Some analysts believe the strength of recovery efforts will ensure gold falls to a price around $1,500-$1,600.
Other analysts think gold prices in 2022 will sit around $1,700-$1,800.
Some think the price of gold will reach nearly $2,000 before the end of 2021.
It seems as though analysts believe the recovery efforts will extinguish gold’s momentum, while others believe inflation fears will cause investors to go back to gold.
Gold Tries to Build Off Its Recent Two-Month High
For a while, gold seemed to hover around the $1,800 mark.
Over the past two months, however, gold has rallied—but investors want to know if it’s a sustainable rally.
To gauge whether this is a sustainable rally, gold market analysts want to see gold break the $1,835 price level, which has been a barrier.
They also need to see volatility return to the equities market.
If these conditions are met, the price of gold could reach new heights.
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