Inflation is higher than it has been for decades – but 2022 does not have to be a peak year for gold investments.

In any case, the analysts of the industry organization World Gold Council (WGC) describe the situation as ambivalent in their outlook for the year: On the one hand, many investors turn to gold when inflation is high.

On the other hand, a phase around interest rate increases, especially in America, could be less beneficial for the price of gold.

When interest rates rise in the United States, interest-free gold becomes less attractive compared to other investments such as government bonds, which depresses the price.

At the same time, the turnaround in interest rates can make the dollar more expensive, which makes gold traded in dollars relatively less attractive in other currency areas.

Headwind from rising interest rates

Christian Siedenbiedel

Editor in Business.

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In any case, Juan Carlos Artigas, the Council's head of analysis, says: “The outlook for gold in 2022 depends on what developments will be decisive going forward.

While factors such as ongoing inflation and jewelery demand are likely to be supportive, rising interest rates could provide headwinds.” While gold prices may fluctuate, ultimately its value as a highly liquid hedge remains constant, Artigas said , Covid-19 related market volatility and increased investor risk appetite.”

The price of gold had recently risen again somewhat after being quite low at times in the summer.

A troy ounce (31.1 grams) recently cost around 1822 dollars.

Calculated in dollars, it closed the year 2021 with a minus of around 4 percent to 1806 dollars.

However, the World Gold Council emphasizes that the annual balance in different currencies turned out to be very different.

Gold recorded a plus of 3.3 percent in euros and even completely different price increases in weaker currencies – in Turkish lira, for example, a plus of more than 67 percent.

Central banks likely to buy gold in 2022

In a phase of rising interest rates, the devil for the price of gold is in the details, says the World Gold Council. Analysts examined past periods of interest rate hikes for their impact on gold prices. They first state: “The Fed has generally not tightened monetary policy as aggressively as the members of the committee had originally expected.” In addition, a certain pattern often emerges: in the months before the US Federal Reserve Bank raises interest rates, the price of gold has risen mostly developed below average, only to perform significantly better in the months that followed. After all, it is primarily the expectations for the future that move the price of gold - the dollar also plays an important role, which showed the opposite pattern.American equities, on the other hand, had their strongest performance before a rate hike cycle, but posted weaker returns afterwards. One should not underestimate the fact that the gold market is global, even if it is heavily dependent on America: Other central banks such as the European Central Bank are even more reluctant to raise interest rates - that could help the price of gold.

Gold purchases by central banks themselves should be supportive of gold prices this year, according to the World Gold Council.

The same applies to gold demand for jewelry making: "We believe that in 2022 the price of gold can still receive positive, albeit modest, support from key jewelry markets such as India."