(Kitco News) – After gold‘s disappointing performance in 2021, analysts are tempering their enthusiasm, according to the London Bullion Market Association’s 2022 forecasts.
Tuesday, the LBMA released the results of its annual forecast survey. Among the 34 analysts who participated in this year’s survey, expectations are for gold prices to remain relatively stable, averaging 2022 around $1,801.90 an ounce, relatively unchanged from last year’s average price of $1,798.60 an ounce.
While the average price is expected to be relatively flat, analysts see the potential for the market to swing within a $780 range. According to the report, analysts are watching three factors to impact gold this year, rising interest rates, the growing inflation threat and higher market volatility.
“Surprisingly, COVID-19 and geopolitical tensions were not particularly regarded as key influences for the gold price in 2022,” the LBMA said.
Thorsten Polleit, chief economist at Degussa, is the most bullish on gold this year as he sees the potential for gold prices to push to $2,280 an ounce. Polleit said that he remains bullish on gold as he expects that the Federal Reserve’s interest rate hikes will mostly be “cosmetic.” He added that real interest rates will remain in negative territory as the Fed will not keep inflation under control.
“The widely held expectation is that the central banks’ tightening of monetary policy this year is likely to keep a lid on the prices of precious metals, gold in particular, for now. However, we believe that, at the end of the day, central banks will prioritize the goal of “keeping the economies going” over “bringing inflation down,” he said.
The most bearish among the gold analysts is Bernard Dahdah, precious metals analyst at Natixis. He said that gold prices could drop to $1,630 an ounce.
“We expect to see gold prices continuing to retreat in 2022, mainly on the back of normalization and the potential for rate hikes by the Fed and other central banks. Although inflation is expected to remain relatively elevated, we see it being at much a lower level (2.8%) than in 2021 (7%),” he said in his forecast.
Analysts are even more bearish on silver as they forecast prices to average the year around $23.54 an ounce, down 6% from the 2021 average price of $25.14 an ounce.
Andy Habluetzel, analyst at Sharps Pixley, is the most bullish on silver in the new year as see sees prices moving as high as $30 an ounce.
“We consider the silver price to be undervalued relative to most asset classes, particularly compared to other commodities,” he said. “We expect the investment appetite to shift more and more towards silver this year to the detriment of gold investments.”
Yufei Liu, precious metals analyst at Bank of China, is the most bearish on silver with a downward target of $17.20 an ounce.
“The macro-environment will be a headwind for silver since the Fed is on track to end asset purchases, hike rates and shrink balance sheets. US inflation will likely cool down with monetary policy tightening, so that real interest rates will rebound. Fortunately, fundamentals will provide some support,” he said.
Analysts don’t see much potential for platinum with an average price forecast of $1,063.40 an ounce, down 2.5% from the 2021 average of $1,090.20 an ounce.
James Steel, precious metal analyst at HSBC, sees the most potential for platinum with a high of $1,174 an ounce.
“There is no shortage of platinum, with 2022 looking like another surplus (pre-investment) year, so it difficult to be too bullish on the metal,” he said. “However, the surpluses in the market should start to narrow before moving to a deficit in 2023/24, as the metal starts to gain market share from palladium in gasoline autocatalysts.”
Frank Schallenberger, head of commodity research at LBBW, is the most bearish on platinum. He sees prices falling as low as $771 an ounce.
“The fundamentals still don’t look too good for platinum. The supply surplus on the market is here to stay and the triumphant advance of electric vehicles will make platinum demand for catalysts even smaller,” he said.
Analysts are the most bearish on palladium, with prices expected to average the year around $1,967.60 an ounce, down 18% from the 2021 average of $2,398.30 an ounce.
Philip Klapwijk, precious metals analyst at Precious Metals Insights, is the most bullish on palladium, with an upside target of $2,800 an ounce.
“An expected recovery in auto production during 2022 as the constraint from chip shortages eventually lifts and underlying vehicle demand grows in line with the COVID epidemic easing will boost autocatalyst use of palladium in spite of some marginal substitution losses to lower-cost platinum,” he said.
Schallenberger is also the most bearish on palladium as he looks for a low price of $1,313 an ounce.
“More and more electric vehicles will slowly but surely lead to lower dynamics on the demand side for palladium. And the slowdown in auto production will keep on dragging down demand in 2022,” he said.
At the end of the year, the analyst with the closest forecast will win a one-ounce gold bar from the LBMA.