Should You Invest In Precious Metals In 2022?

Monday, 25 July 2022, 1:59 pm
Article: Hugh Grant

In response to Russia's invasion of Ukraine in late February, the gold market soared above $2,000 an ounce for the first time since August 2020. Geopolitical uncertainties made gold a safe shelter for investors.

Gold prices have already fallen below $1,800 an ounce as central banks raise interest rates aggressively, boosting returns from interest-bearing assets as alternatives to gold and strengthening the US currency.

Gold market outlook? Given these price determinants, is gold a smart investment in 2022?

In this article, we look at gold investment choices, market factors, and expert predictions for gold prices.

Gold Falls From 2020 High

The gold price missed analysts' estimates for much of 2021 as interest rate rises overcame fears about the Covid-19 epidemic and soaring inflation.

Gold is a hedge against inflation because it holds its value when fiat currencies lose value. When interest rates rise, gold becomes less appealing since investors earn neither interest nor dividends.

The gold market was pressured by predicted rate rises from the US Federal Reserve, ECB, and Bank of England.

Falling global equities and bond prices boosted gold's appeal to investors seeking to conserve cash during market instability. First-quarter 2022 inflows into gold ETFs totaled 269 tons, or $17bn, the biggest quarterly total since the third quarter of 2020, while US Mint sales of gold coins touched their highest level since 1999.

Gold's Uses

Gold is used for jewelry and investing and people just seek to buy gold bars for sale. Global gold consumption reached 4,021 tons in 2021, up 50% from the fourth quarter.

Jewelry manufacture accounted for 2,220.95 tons, gold bars and coins for 1,180.37 tons, central banks and other financial institutions for 463.07 tons, and technology for 330.16 tons.

Should You Invest in Gold?

Gold has always been a store of value and means of payment. Many investors retain 5 to 10% of their portfolio's worth in gold, either real bars and coins or ETFs, to diversify and hedge against stock and bond market disasters.

Gold's inverse relationship to the U.S. dollar makes it a potential hedge against a decrease in the reserve currency's value. It's a good investment during inflation and geopolitical upheaval or other worldwide occurrences.

Gold has the best liquidity among precious metals used as portfolio hedges. Investors might immediately trade gold for cash. Buying gold online has become increasingly accessible for investors.

Gold's Risks

Gold, like any other financial asset, has risks and disadvantages when deciding if it's a smart investment. Gold doesn't provide income like savings accounts and dividend equities, so its return might lag over time. High gold price volatility suggests long-term investments may not be profitable.

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