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Gold prices to average around $1,630 in 2022 if COVID-19 doesn't impact global normalization - Natixis

Kitco News

Welcome to Kitco News' 2022 outlook series. The new year will be filled with uncertainty as the Federal Reserve looks to pivot and tighten its monetary policies. At the same time, the inflation threat continues to grow, which means real rates will remain in low to negative territory. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2022.

(Kitco News) - The normalization of the global economy in 2022 and tighter U.S. monetary policies are going to take their toll on gold and silver, according to analysts at Natixis.

In a telephone interview with Kitco News, Bernard Dahdah, precious metals analyst at the French Bank, said that he is not expecting to see a complete collapse in gold next year; however, he does expect prices to fall back to pre-pandemic levels.

In its 2022 precious metals forecast, Natixis sees gold prices averaging the year around $1,630 an ounce.

"Gold prices will still be higher than the 2010 average, but we so see a normalization in the market," he said.

The French bank is also not optimistic on silver prices next year. Dahdah said that silver should follow gold prices lower, even as the world continues to transition to more green energy.

Natixis sees silver prices averaging 2022, around $21.10 an ounce.

Dahdah added that Federal Reserve monetary policy will remain the biggest driver of gold prices in 2022. He explained that if the global economy continues to normalize, supply chain disruptions should be resolved next year, diminishing the growing inflation threat.

Gold price to drop 16% to $1,500 in 2022, 2023 doesn't look any better - ABN AMRO

At the same time, further growth in the U.S. economy and elevated inflation will prompt the Federal Reserve to raise interest rates next year.

"With inflation expected to ease and the Federal Reserve raising interest rates, we expect that real rates will be less negative from where they were in 2021. We expect real rates to be a lot closer to zero in 2022," said Dahdah. "That will create a difficult environment for gold. Higher rates and yields increase the opportunity cost of holding the metal."

Currently, Natixis is looking for the Federal Reserve to raise interest rates in late 2022 or early 2023, which is significantly more dovish than current market expectations.

Markets are pricing in nearly four rate hikes for next year, with the first move coming as early as May. Last week the Federal Reserve signaled that it could raise interest rates three times.

Dahdah said that the path of U.S. monetary policy will depend on the speed of the economic recovery. He added that if the world can move on from the COVID-19 pandemic, then there is a high probability that the Federal Reserve will meet its target.

The biggest unknown factor heading into the new year is COVID-19 and the new highly transmissible Omicron variant, which is spreading around the world. Some countries are looking at establishing new lockdown measures.

"If Omicron because a huge problem and major lockdown measures are implemented, then gold prices could easily go back to $2,000 an ounce," said Dahdah.

However, Dahdah said that the major linchpin in global economic growth will be China. He said that new lockdown measures in China will further disrupt the global supply chain, increasing inflation pressures and limited growth.

"Even if the rest of the world is locked down, if China remains open, then the global economy could still see a continued recovery," he said.  

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.