Year-Ender 2022: How have precious metals – Gold and Silver performed this year? Analysts decode; highlight reasons

The precious metals such as gold and silver were able to post decent performance this year on the domestic front despite the muted show in the global prices, according to analysts. The former gained 14 per cent and the latter was up by around 10 per cent on the domestic front in 2022 so far.

Globally, precious metals tend to perform when interest rates are falling. However, this time was different when precious metals didn’t perform well during a falling interest rate environment but are doing well in a rising rate scenario, Apurva Sheth, Head of Research, Samco Securities said in a note.

Historically, Gold and Sensex have moved hand in hand, Sheth stated, adding that the Gold and Sensex both were trading at around 6,000 in 2004. Gold was the first to cross 30,000 in 2013, while Sensex crossed 60,000 in 2022.

Similarly, Nirpendra Yadav, Senior Commodity Research Analyst, Swastika Investmart said, “The US Fed’s ultra-high interest rate monetary policy depressed gold and silver prices in 2022. However, despite the Fed’s series of rate hikes, inflation sustained near 40 years higher levels while sizeable depreciation in the currency of the emerging market hold back gold and silver prices.”

While, the Russia-Ukraine war pushed the gold prices to near all-time highs in first quarter of this fiscal, while broad dollar strength crushed the commodity to two-year lows in the third quarter, Ravindra V Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities said.

He added that the domestic gold prices were more resilient, particularly due to the sharp Rupee depreciation, which fell by more than 10 per cent year to date. “On the MCX Gold tested a high of Rs.55558/ 10gms and a low of Rs.47300/ 10gms in the Q1, 2022.”

Similarly, Silver has witnessed a rollercoaster ride in 2022, thanks to the increased volatility in gold and industrial metals, VP-Head Commodity Research at Kotak Securities noted.

“Silver is a precious metal that has the most usage in the industrial sector and hence it gets affected by trends in both gold and industrial metals. The most significant factor that has kept silver prices in check is the lack of investor interest,” Ravindra Rao said in his comment.

On the MCX Silver tested a high of Rs.73078/kg and a low of Rs.51857/kg in 2022.

Gold is typically considered as a hedge against inflation but was unable to provide returns till September 2022 as aggressive tightening was done by central banks, Naveen Mathur, Director – Commodities and Currencies, Anand Rathi Shares and Stock Brokers.

“Meanwhile, we saw aggressive buying done by central banks in the second half of the current year into gold to diversify away from the dollar indicating gold appeal as a safe haven hedge. Dollar also weakened in the fourth quarter as inflation started to decelerate from its multi-decade high levels,” Mathur said.

The rise in Silver prices garnered assistance from its industrial side in 2022, with its role in automotive electrification and the 5G sector helping to push annual demand 5 percent higher, the Commodities Director at Anand Rathi Shares also added.