US potential rate hikes to put a lid on gold price in 2022
02:39, 14 December 2021
Analysts and investors will be watching closely a series of potential rate hikes by the US Federal Reserve (Fed) in 2022 which is likely to keep a lid on gold prices next year.
Most analysts are bearish on gold price for next year on expectations that the Fed will speed up its tapering bond purchase programme and start rate hike earlier than expected to fight surging inflation. The US consumer prices surged in November with the Consumer Price Index (CPI) up 6.8% on annual basis, faster than the 6.2% rise in October, Bureau of Labor Statistics said last week. It was higher than 6.7% forecast by economists.
The US inflation data pushed spot gold price to $1,780 per ounce but not enough to push it to break $1,800/tonne. The precious metal has steadily declined after hitting a record high of above $2,000/ounce in August 2020. While starting 2021 at $1,900/ounce, gold has struggled to climb back to record highs.
Potential rate hike
Kitco News reported on Monday that markets are pricing in a rate hike in June and see the potential for four rate hikes next year.
Meanwhile, Ole Hansen, head of commodity strategy at Danish lender Saxo Bank on a 10 December note, said market expectations for future US rate hikes have jumped with three 0.25% hikes now priced in for 2022, with the first one expected no later than June, a year earlier than expected, just a few weeks ago.
Kristina Hooper, chief investment officer at Invesco, said as quoted by Kitco News on 13 December that once the Federal Reserve starts to raise interest rates, the focus will turn to just how high those rates can go. Hooper expects gold prices to continue hover around $1,800/ounce.
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Bearish on gold
UBS analysts as quoted by S&P Global on 6 December forecast gold price will declined through 2022, with an end-of-year forecast of $1,650/ounce.
“A moderation in inflation expectations, alongside higher nominal rates, should see US real rates push higher, eventually, and weigh on gold,” the analyst said.
JP Morgan forecast gold price to average $1,631/ounce in 2022 compared to estimated $1,795/ounce in 2021.