According to some analysts at the World Gold Council, the precious metal remains one of the most profitable “active” metals so far in 2022, especially for investors outside the United States, which use currencies other than the US dollar. Next, we will know some reasons and also the perspectives of the behavior of this market for the middle of the current year 2022.
Gold Was Supported By Higher Risk
Real rates and the dollar alone suggest that gold would have been lower in the first half of the year. Investors face a challenging environment in what corresponds to the second semester of this year 2022, in which they will have to overcome the increase in interest rates and the resurgence of risks due to political conflicts and high inflation. So when it comes to investing in gold in the short term, it is likely that it will continue to be reactive to real rates, which is driven by the speed at which the World Central Bank adjusts monetary policy in each country, in an effort to control inflation.
Although the appreciation of the US currency against other currencies is considered an obstacle to the price of gold (if it is measured by the dollar), at the same time it has supported the performance of gold with respect to other currencies, which counts the yen, the euro and the pound sterling among others
Gold Has Held Up Well Through Mid-2022
By the end of June 2022, the short-term model is expected to be maintained, which is a multiple regression model of monthly returns on the price of gold, which can be grouped into four thematic categories that are key to the performance of this precious metal: market risk, economic expansion, opportunity cost, and momentum.
These four categories capture the motives behind the demand for gold, especially when it comes to investment demand that may be the marginal driver of near-term gold price performance. Investors will face significant challenges in the remainder of 2022 and as such will need to balance various competitive risks aggravated by considerable uncertainty over monetary policy, which will increase gold price volatility.
What Investors Expect In The Future
It is good to note that most of the market participants expect significant increases in the monetary policy rate, there are analysts who argue that central banks may not tighten monetary policy as expected. The reasons could be economic slowdowns that can result in contractions, although in some cases, it is also due to a change in supply restrictions in non-commodity consumer sectors.