After gains nearing 25% in 2020, gold deviated from this trend in 2021, dropping by 5% due to several pressing factors, including the rapid recovery of the global economy, improved confidence following the discovery of vaccines, and investors' inclination towards risk in stock markets. Analysts and specialists had previously forecasted, in interviews with "Al Arabiya," that pressures on gold prices would continue throughout 2022, driven by radical changes in monetary policies from central banks and interest rate hikes, which diminish gold's attractiveness.
Reduced stimulus and rising interest rates are expected to push government bond yields higher, increasing the opportunity cost of holding gold, which does not yield returns. Global inflation levels acted as a deterrent to rising gold prices in 2021, with cash liquidity flowing into stock markets due to record highs, particularly in the technology sector. The 70% rise in gold prices between the third quarter of 2018 and the equivalent quarter of 2020 has put pressures on its future movements.
Analysts' predictions for gold prices in the new year are somewhat disappointing. The Dutch investment bank "ABN Amro" has forecast a decline in gold prices by 16% in 2022, while Deutsche Bank went further, predicting a drop in prices to $1,500 per ounce in the new year, followed by a decrease to $1,300 in 2023.
**Favorable Position**
According to Habib Akiki, Chief Market Strategist at Tradepedia, gold was in a very favorable position for a rise this year. Despite a positive outlook for the first half of the year, it ended with sideways trading rather than an upward trend. Akiki predicts that the precious metal will continue to move sideways throughout 2022, as central banks are tightening, which is not favorable for gold, and we may see some price declines.
**Main Driver**
Nour El-Din Mohamed, CEO of Target Investment, considers the main driver for gold's rise in the current phase and in 2022 to be ongoing inflationary pressures. He predicts that gold could reach $2,000 per ounce in high estimates. He highlighted that ongoing inflationary pressures demonstrate the need for interest rate hikes, which are expected to rise in the new year, reaching 1% in the United States. However, he cautioned that real interest rates might remain negative or close to zero, which positively impacts gold, mentioning that holdings in traded funds have started to show a positive trajectory after a negative trend since last July.
**Severe Pressure**
Raed Al-Khudr, Head of Research at Equiti Group, anticipates that gold will face severe pressure from tightening monetary policies, leading to a decline in the yellow metal. He stated that the increases seen in gold are inflation-driven, amid lower cash flows into gold-traded funds, predicting that the ounce may drop below $1,750 in the first two months of the upcoming year.
**Best Means of Protection**
Ammar Shata, founder of Al-Khabeer Financial Company, asserted that gold has traditionally been the best means of protection against turmoil, serving as a safe haven amid market fluctuations. He added that hedging with gold should not exceed 5% to 8% of the investment portfolio, and the same should apply to silver. He clarified that while gold is not the best hedge against inflation, it is better suited for protection and caution against political disturbances.
