According to Wells Fargo, gold could go from being one of the worst assets of the past year to one of the best in 2022 as some of its biggest headwinds dissipate. Gold is poised to rally to new all-time highs after ending the year down 3.6%, its worst drop since 2015,
Wells Fargo said in its updated gold price outlook. “There were some sizable 2021 gold headwinds in play, with the more significant including a blistering risk-on rally with little volatility, a strengthening U.S. dollar, and real interest rates that found their bottom,” Pickle said. “One could also throw onto the pile inflation that was assumed to be transitory for much of the year, surging cryptocurrency prices, and increasingly optimistic investors and economic outlooks.”
One of the main shifts this year, however, is the idea that the return on risk return is limited or even endangered, and the US Stock market was already much more careful after a defeat in January.
“Risk asset returns may be choppier with higher volatility this year, which could prompt a rotation back into the perceived safe-haven — gold. The bull commodity supercycle should lend its support as well, as it is the tide that lifts all commodity boats,” Pickle highlighted.
On top of that, Wells Fargo’s U.S. dollar outlook suggests that the greenback’s pressure on gold will let up in 2022. “And our range-bound U.S. dollar outlook suggests that the greenback will cease to be such a stiff headwind this year,” Pickle said.
These economics changes are doubtless to encourage a lot of gold shopping for throughout the year, consistent with the outlook. Wells Fargo comes to ascertain gold between $2,000 and $2,100 by the year-end.
