Where are gold, silver prices headed in 2022?

Gold and silver prices are expected to remain broadly stable or lower in 2022, with trends influenced by factors including interest rates and global monetary policy.

But analysts are divided over longer-term prospects, with some forecasting further declines and others expecting the precious metals to soar to new highs in the coming years.

Mining companies across Latin America are taking advantage of the recent rise in gold and silver prices, which have swelled cash flows and treasuries, and enabled firms to invest in optimizations of existing assets, and in some cases advance growth projects.

RECENT TRENDS

Gold has traded around US$1,800/oz in 2021, down from the record of over US$2,000/oz reached in August 2020, which followed massive fiscal stimuli in response to the COVID-19 pandemic.

While down from the 2020 peak, prices have remained far higher than the US$1,100-1,400/oz band seen for most of 2013-19.

Gold closed up 0.58% at US$1,796.35/oz in London on Wednesday.

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Silver has followed a similar trajectory, rising in mid-2020 to around US$27/oz, before dropping off to around US$25/oz this year.

Prices have recently fallen further to below US$23/oz, ending up 0.75% at US$22.84/oz Wednesday, but remain higher than the US$15-20/oz levels which dominated in 2014-19.

INTEREST RATES

Currently, interest rates are the most important factor affecting precious metals prices, according to US-based consultancy CPM Group.

“While we are seeing some upward pressure on interest rates likely to emerge over the course of 2022, and we are seeing gold and silver prices, along with a lot of other assets, fall predicated on that view, we point out that on a real, inflation-adjusted basis interest rates are still negative, and are likely to continue to be negative for a number of years to come,” managing partner Jeffrey Christian told a webinar hosted by the Independent Research Forum.

“In that kind of environment, some of the detractions of investing in non-yielding assets like gold and silver disappear, and you have inflationary concerns as well.”

While broadly stable prices are expected in the year ahead, the metals’ next move is likely to be upwards.

“Our expectation is that consolidation will probably continue through most of 2022 but that at some point we will stop that consolidation phase and move into another round of rising prices of gold and silver as investors become more concerned about political, economic and financial uncertainties that they are facing personally and that the world is facing,” Christian added.

The uncertainties include domestic and international political concerns in the US, China, Europe and Russia, while the world has also “loaded up on debt.”

“Going forward we look for the consequences of the next recession and our expectation is that we might see another recession in 2023-24.

“If that happens we start having more stringencies in the debt market and you start seeing more currency volatility, and you could see investors go from buying 40Moz gold this year… to maybe 50Moz.

“That increase in investment demand would be reflected in sharply higher prices.”

Gold is likely to move beyond its US$2,000/oz peak, with silver potentially moving higher than US$40/oz, although prices in the US$22-28/oz are likely in 2022.

FALLING PRICES

Dutch bank ABN AMRO has a different outlook for gold.

“We continue to expect lower gold prices in 2022 and 2023,” senior FX and precious metals strategist Georgette Boele said in a note this month.

The company expects gold prices to fall to US$1,500/oz at end-2022, and to US$1,300/oz a year later.

“There are several reasons for our bearish gold price outlook. First, monetary policy will tighten globally going forward,” Boele said.

Some central banks have already started this, such as Norway, New Zealand, Brazil and South Korea, with the US Federal Reserve expected to start hiking rates in mid-2022, she added.

“Tighter monetary policy is in general negative for gold prices, also because yields on government bonds have a tendency to rise,” the note said.

Yields on 2-year US treasury bonds will also pick up, which will weigh on gold prices, with the bank also expecting the US dollar to rally further, with a higher dollar also generally negative for gold.

“Last but not least, another point of vulnerability for gold is that the investor community is still substantially long [on] gold, with the risk that an unwind of these positions weighs on prices,” Boele added.