Gold Outlook 2022: Yellow metal to perform better in current year - know what would drive commodity
The year 2022 is likely to witness the start of the rate tightening cycle in the US. In the preceding interest rate hike cycles, gold has performed well as it marks higher inflation, an improving economic cycle and ample liquidity, the brokerage added further.
In the calendar year 2022, the yellow metal is expected to perform better than the year 2021 as the inflation worries outweigh concerns over a reversal of the interest rate cycle, the domestic brokerage firm ICICI Direct mentioned in its market strategy for 2022.
“The year 2022 is likely to witness the start of the rate tightening cycle in the US. In the preceding interest rate hike cycles, gold has performed well as it marks higher inflation, an improving economic cycle and ample liquidity,” the brokerage added further.
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In the calendar year 2021, the COMEX gold in dollar terms, gave negative 1.52 per cent return, while in MCX, the returns were more lackluster by almost 5 per cent lower. Between 2015 December and 2019 June, the gold in MCX terms have given around 36 per cent return, ICICI Direct said in report.
It also said, “The expected return on safe haven assets like US treasuries has reduced significantly as the initial period of a rate hike cycle may be negative for bond markets as participants would be hesitant to allocate higher amount in treasuries in anticipation of a capital loss due to rise in yields.”
If the euphoria surrounding crypto currencies subsides, it may result in liquidity flowing back to traditional asset classes like precious metals, the brokerage houses added.
Similarly, the World Gold Council in its annual calendar year report mentioned that the Gold ETFs experienced outflows of US $9.1 billion, which comprises of 4 per cent of asset under management (AUM) driven by losses in North American funds.
The report further added that Asian gold ETFs emerged as the primary growth driver among global funds, adding around 20 per cent over the year, Similarly, Gold ETFs in Europe turned positive in the second half of 2021 amid rising inflation expectations.
Despite considerable outflows in 2021, gold ETF holdings remain significantly above pre-pandemic levels given record inflows during 2020, the world gold council said in a report on Tuesday.
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