The gold market has erupted after five months of consolidation and commodity analysts at Société Générale see significant rally potential during the first quarter of 2022. Société Générale analysts’ gold expectations and assessments for the coming year Cryptocoin. com we have prepared for its readers.
Société Générale optimistic for the start of 2022
In its latest price forecast, the Bank of France says US monetary policy will continue to support prices as inflation pressures rise. Analysts make the following assessment:
The Fed seems reluctant to raise interest rates anytime soon. This, combined with high inflation, creates the perfect mix of negative real rates for gold.
In its updated forecast, Société Générale forecasts precious metal prices to average around $1,950 in the first quarter of next year. The bank’s average price target represents a 4.5% gain from current prices. December gold futures were last trading at $1,875, up 0.50% on the day.
Last week, gold prices saw their best price increases since May. The precious metal climbed above $1,850 as the U.S. Consumer Price Index saw its 6.2% year-on-year increase, the most significant increase in more than three decades.
Société Générale expects inflation to drop from current levels, while economists expect price pressures to stay above the trend through 2022. The bank forecasts inflation to be 4.4% this year and 3.7% next year. While the bank was optimistic about gold at the start of the year, analysts say prices should start to cool in the second half:
In the second half of next year, inflation is expected to decline and interest rates are expected to rise gradually. US real interest rates may turn positive again at the end of 2022 and we may see the Goldilocks era pass.
“Expected ETF fund inflows are sufficient to increase the price of gold significantly”
On the upside, analysts predict that if inflation persists and economic activity begins to slow, gold prices could rise above $2,000 by the second quarter and continue to rise through 2022. Analysts reiterate that investment demand for gold-backed exchange-traded funds (ETFs) remains the critical component to unlocking the precious metal’s value.
Our forecast is mainly based on our expectation that ETF outflows will stop and we will start to see moderate inflows by the end of the year and into next year. For 2022, we expect a total of 300 tons of inflows into the gold ETF, mostly focused on the first half of the year, and inflation risk will still be at the forefront. This is enough to significantly increase the price of bullion. However, it is also much lower compared to the 408t and 874t experienced in 2019 and 2020 respectively.
Société Générale adds that they see the potential of central bank precious metal demand to support gold prices. Analysts point to the dollar’s loss of confidence and make the following prediction for the precious metal:
In a world that has become more multipolar and US debt swells, the US dollar as a reserve currency is losing credibility and central banks are willing to move away from it by creating gold reserves.