Global gold prices end H1 flat; headwinds seen in remaining 2022


Gold prices finished 0.6% higher at the end of the first half of 2022, closing at US$1,817/oz, the World Gold Council (WGC) said in its mid-year outlook, adding that it saw inflation, political risks and interest rate hikes as key headwinds in the remaining months of the year.

“The gold price initially rallied as the Ukraine war unfolded and investors sought high quality, liquid hedges amidst increased geopolitical uncertainty. But gold gave back some of those early gains as investors shifted their focus to monetary policy and higher bond yields, the WGC report said.

By mid-May, however, gold prices had stabilised in response to the tug of war between rising interest rates and a high-risk environment. The latter was a combination of persistently high inflation as well as likely support also from the extended conflict in Ukraine and its potential knock-off effects on global growth, it added.

According to the WGC, investors face a challenging environment during the second half of 2022, needing to navigate rising interest rates, high inflation and resurfacing geopolitical risks. In the near term, gold will likely remain reactive to real rates, driven by the speed at which global central banks tighten monetary policy in an effort to control inflation.

The WGC played down the implications of the risks, saying that while rate hikes may create headwinds for gold, many of these hawkish policy expectations are already priced in. “Concurrently, continued inflation and geopolitical risks will likely sustain demand for gold as a hedge and underperformance of stocks and bonds in a potential stagflationary environment may also be positive for gold,” it said.

The WGC said that gold’s both strategic and tactical role will likely remain relevant to investors, particularly while uncertainty stays elevated due to high, persistent inflation with gold playing catch-up to other commodities; market volatility linked to shifts in monetary policy and geopolitics; and the need for effective hedges that overcome potentially higher correlations between equities and bonds.

Leave a Reply

Your email address will not be published.