Gold 2022 Outlook: Return to Trend with Lingering Upside Risks

By: Maxwell Gold, George Milling-Stanley, Diego Andrade, & Chi Kit Robin Tsui

  • Gold looks to resume its longer-term structural bull market as we look ahead to 2022
  • A key factor of consideration for gold remains the path and speed of monetary policy among global central banks
  • Potential for higher volatility may push investors to gold as a potential hedge against heightened market risks

After posting 18% and 25% gains in 2019 and 2020, respectively, the gold price is on pace to close out 2021 with a slight negative return.1 Following last year when record strength in investment demand offset record weakness in the jewelry sector, 2021 has been a period of recalibration for gold — reverting toward longer-term trend levels among demand sectors, with the price seeking to consolidate at a new higher base.

Looking ahead to 2022, there are several reasons to remain optimistic about gold’s outlook. The continued battle against COVID-19 and new variants, disruptions due to supply bottlenecks, rising consumer and commodity prices, and monetary policy shifts point to the likelihood of higher volatility on the horizon. Particularly set against the backdrop of an ongoing global pandemic, these headwinds may prove beneficial for gold as it looks to resume its longer-term bull market which commenced at the onset of the previous tightening cycle by the Federal Reserve (Fed) in December 2015.

Here, we outline four macroeconomic themes that remain at the helm for gold’s 2022 outlook. Based on these themes, our base case outlook sees gold returning to long-term trend levels with a potential boost to the upside driven by further recovery in emerging markets, monetary and fiscal policy missteps, and heightened volatility.

gold may resume longer term trend following 2021 consolidation

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Footnotes

1Gold spot price in US dollars was down 6.52% year to date. Bloomberg Finance L.P., State Street Global Advisors. Data as of November 30, 2021.

Glossary

Bloomberg Commodity Index
A broadly diversified commodity price index distributed by Bloomberg Indexes that tracks 22 commodity futures and seven sectors. No one commodity can compose less than 2 percent or more than 15 percent of the index, and no sector can represent more than 33 percent of the index.

Bloomberg Emerging Markets USD Aggregate Bond TR Index
A flagship hard currency Emerging Markets debt benchmark that includes USD-denominated debt from sovereign, quasi-sovereign, and corporate EM issuers.

Bloomberg U.S. Aggregate Bond Index
A broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

Bloomberg US Corporate High Yield Index
An unmanaged index that is comprised of issues that meet the following criteria: at least $150 million par value outstanding, maximum credit rating of Ba1 (including defaulted issues) and at least one year to maturity.

Bloomberg U.S. Corporate Investment Grade Index
Measures the investment grade, fixed-rate, taxable corporate bond market.

Bloomberg U.S. Treasury Index
Measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury.

Dollar Index / US Dollar Index (DXY)
A currency benchmark that measures the performance of the US dollar against a basket of currencies: the euro (EUR), the yen (JPY), the British pound (GBP), the Canadian dollar (CAD), the Swiss franc (CHF) and the Swedish krona (SEK). Its shorthand symbol in financial markets is “DXY.”

HFRX Global Hedge Fund Index
The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies, including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry.

MSCI EAFE Index
An equities benchmark that captures large- and mid-cap representation across 22 developed market countries around the world, excluding the US and Canada.

MSCI Emerging Markets Index
The MSCI Emerging Markets Index captures large and mid-cap representation across 23 emerging markets countries. With 834 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

S&P 500 Index
A market-capitalization-weighted stock market index that measures the stock performance of the 500 largest publicly traded companies in the United States.

Spot Gold Price
The price in spot markets for gold. In US dollar terms, spot gold is referred to with the symbol “XAU,” which refers to the price of one troy ounce of gold in USD terms.

US CPI Urban Consumers NSA Index
Measure of prices paid by consumers for a market basket of consumer goods and services.

Originally Posted on December 14, 2021 – Gold 2022 Outlook: Return to Trend with Lingering Upside Risks

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