The 2022 gold outlook looks promising, with the first half of next year offering the best environment for gold bulls, according to TD Securities’ commodity outlook. “The positive gold story is in play in the first half of next year,” TD Securities commodity strategists wrote.
“These factors will help gold rise to $1,900 in the first half of 2022”
Bart Melek, head of global commodity markets strategy at TD Securities, states that the precious metal could rally towards $1,900 in the first six months of the year as markets focus on economic growth, inflation and political risks:
The pending US midterm elections, US financial drift, fairly stable central bank gold purchases, and political risks associated with a significant slowdown in the US and global recovery are additional factors that could rekindle investor interest in gold. These factors will help gold rise to $1,900 in the first half of 2022, according to our estimates.
As you can follow from the news , the gold price was in consolidation mode throughout 2021, it started the year at around $1,960 and its last trades were just over $1,750. Bart Melek makes the following assessment:
Real interest rate trends, driven by inflation developments, Fed policy signals, and nominal interest rates, led to these gold price fluctuations. For much of 2021, investor ETF, CTA, and derivatives positions were very skewed towards a shortening of risk.
Bart Melek: It may be too early for the Fed to pull the trigger for a rate hike next year
A positive driver for gold, which markets are currently underestimating, is a Federal Reserve that doesn’t want to raise rates in the middle of next year, according to the head of strategy. The CME FedWatch Tool is already pricing in a 44% chance for a first rate hike in June. Bart Melek draws attention to the following:
Given this framework and the fact that the market is pricing in an early Fed rate hike by next summer, current investor bias towards short-term risk has driven prices down to $1,755 recently. However, the summer of 2022 may be too early for the Fed to pull the trigger for a rate hike, given the fact that nonfarm payrolls in the US are 4-5 million below pre-Covid levels.
According to Bart Melek, the focus for next year will be economic data that will determine how aggressive the Fed can handle next year:
Factors that could prevent the US central bank from pulling the trigger for an increase as early as the market predicts include weak economic data over the next few months and a FOMC focused on full employment with a somewhat relaxed stance against strict inflation targeting (perceiving inflation as temporary).
TDS’s quarterly gold price predictions for the next year
Strategy head Bart Melek adds to this scenario that real interest rates will remain low and will encourage gold purchases next year:
The resulting hope for higher potential growth, with a non-accelerating unemployment rate, could leave the US central bank comfortable with keeping the economy warm for longer. This will be a real interest environment that accumulates a lot of gold. The best case for gold is the presence of high but slowing inflation.
TD Securities forecasts gold to average $1,875 in the first quarter of next year, $1,824 in the second quarter, $1,800 in the third quarter and $1,750 in the fourth quarter.