Since gold has been considered a valuable asset for thousands of years, it has always been coveted and in demand, but it is only in recent history that the market has grown to become what it is today, and what it is today is quite significant. mature and stable market.
The gold market is most often quoted in US dollars (XAU/USD), and this market is known to move when both dollar values fall and when the stock and bond markets fall. Moreover, it thrives as a safe-haven asset because it not only moves differently to other markets, but also holds its value well and grows smoothly.
Gold rate dynamics over the past 10 years
From 2011 to 2021, the price of gold has been constantly changing. Starting from mid-2011, the price gradually decreased until the beginning of 2021. From almost 1.9 thousand dollars, the rate dropped to less than 1.1 thousand dollars. After the analytics, 3 main periods were identified:
- mid-2021 - the price of gold rises above 1.35 thousand dollars;
- end of 2021 - beginning of 2021 — reduction in the price of the precious metal to $1.15 thousand;
- mid-2021 - the exchange rate falls below the level of 1.2 thousand dollars.
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Attention! Between 2015-2019 the price of gold was constantly changing, which allowed investors to make money on the difference in rates.
How is the price of precious metals determined?
The London Gold Exchange, which periodically organizes an auction called fixing, has been determining the value of gold for decades. This is where banking and financial companies analyze existing prices for precious metals and then set the most optimal one.
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It is not difficult to assume that prices for this and subsequent years in Russia will be directly related to how exactly the situation on the stock exchange will change. However, it should be understood that the cost of the final product in our country will differ from the price set by London due to the fact that the costs that companies spend on producing this product, plus the inflation rate, are added to it.
Thus, the Central Bank is responsible for the final pricing of metal in Russia, but other banking organizations retain the right to change it. In other words, each bank has its own rate, based on data from the Central Bank of the Russian Federation. Read about investing in precious metals here.
How to find out where the rate is the most profitable today? This information needs to be monitored daily, because the numbers change daily. You need to use online portals with up-to-date data; you can find them through any search engine. Pay attention to the cost of buying and selling; one operation may be more profitable in one bank, and another in a neighboring one.
Changes in the precious metal exchange rate in 2018-2020
In 2021, there was a sharp decline in the price of gold to $1.2 thousand. This provoked a negative forecast until 2022. However, the situation changed after the exchange rate turned in a positive direction.
At the end of 2021, the price of the precious metal increased sharply. After the jump to $1.56 thousand, a moderately positive trend continued for a long time. The increase was more than 20% compared to the 2021 price.
In 2021, the coronavirus pandemic began, its consequences negatively affected the value of many items in the precious metals market. However, gold, on the contrary, began to rise in price during this period. The epidemic led to a global economic crisis. This has made the precious metal popular for investing in order to preserve savings.
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Important! The highest gold price was observed in August 2021. The price reached $2073.
At the beginning of 2021, the cost of the precious metal increased by 17% compared to the end of 2021. Over the last month of summer, the exchange rate reached a record high. However, information about the development and implementation of a vaccine led to a drop of more than $200.
Over the year, gold showed a good level of profitability. The value of the indicator varied in the range of 16-30%. By the end of 2021, the price of the precious metal was $1.89 thousand.
Factors influencing the price of gold
Because gold is such a mature and established market, there are a number of factors that influence its price and how it is affected. Gold is also a fairly unique asset compared to things like stocks and bonds, and this also makes it act differently, and the fact that it acts as a hedge means that you need to look for factors that affect it differently. other assets.
The list of factors to consider includes: consumer demand, volatility protection, gold and inflation, gold and interest rates, good monsoon, correlation with other asset classes, geopolitical factors, weaker dollar, future demand for gold.
Consumer demand is driven by gold as an asset removed from its market. The demand for gold is constantly changing and has recently increased dramatically as electronics manufacturers have seen the use of gold in their products to provide electrical conductivity.
Of course, gold is also used as jewelry, and there is great demand even from world governments who are looking for gold as a store of value, which they store in central banks.
As mentioned earlier, gold is an asset that helps protect against volatility. There is a demand for gold from people who want to protect themselves from instability and uncertainty. Gold is a physical asset, so it can be held and held by individuals, and its market moves differently than typical volatile markets, so it is sought after by people who hedge against uncertainty.
Highlighting gold's attractiveness as an asset in both good and bad times, most investors will buy gold regardless of whether the domestic economy is growing or in recession.
Gold and inflation also work together because inflation is one of the ways money quickly devalues, and when this happens, people choose to keep their money in something that will increase in value, such as gold.
Therefore, in times when inflation remains high for a longer period, gold becomes a hedge against inflationary conditions. This pushes the gold price outlook higher in an inflationary period.
Likewise, gold and interest rates also play a role in moving the price of gold, as lower interest rates - which typically occurs during periods of financial uncertainty when governments want people to spend money - mean it is harder to save.
However, holding gold means that interest rates are prevented from falling and the value of your savings is preserved through the precious metal. In fact, according to some industry experts, under normal circumstances there is a negative relationship between gold and interest rates.
Interestingly, there are cases that can affect the price of gold in regions that are affected by things like weather. For example, India consumes 800-850 tonnes of gold annually and rural India accounts for 60 percent of the country's gold consumption. Thus, monsoon plays a big role in gold consumption because if the harvest is good, farmers buy gold from their income to create assets.
Since gold is also seen as a highly effective portfolio diversifier due to its low or negative correlation with all major asset classes, it is often used during times of uncertainty and that is why one of the factors to look at is the relationship between gold and other asset classes experiencing pressure or pleasure in current financial circumstances.
Factors that influenced the rise in gold prices in 2021
During the pandemic, the price of the precious metal increased significantly for a number of reasons:
- investors considered gold a guaranteed tool for preserving savings;
- the demand for the precious metal has increased significantly, the purchase rate has broken existing records;
- W. Buffett recognized gold as a profitable investment instrument;
- other large investors began to purchase assets in large quantities.
Interesting! Large consumer countries, on the contrary, have reduced consumption of the precious metal during the pandemic.
Experienced Traders' Approaches to Gold Trading
The yellow metal has always been considered a “safe investment haven”. As market players look for alternative assets to replace depreciating currencies, gold only rises in price. With lower interest rates and falling demand for paper money, real preconditions are created for strengthening the position of gold. The precious metal, along with Euribor and the US dollar, has a forward interest rate. It is called “Gofo” and is rising against the dollar along with increasing demand for the yellow metal. To reliably predict prices, experienced traders operate on three main operating factors:
- moods;
- technical indicators;
- fundamental background.
What's happening to the price of gold now?
It is impossible to assess whether the price of the precious metal will rise or fall in 2022 without analyzing the exchange rate in real time. Now (07/17/2021) the price of gold is just over 1.8 thousand dollars. Over the month, the value of the indicator has hardly changed.
During the period June-July 2021, the rate of the precious metal reached 1.77 thousand dollars. This was the lowest price, which occurred on June 29. After the fall, the exchange rate chart had a positive trend with a variable decrease of several dollars.
The importance of momentum
Another important indicator for momentum is the relative strength index, or “RSI.” This driver shows an acceleration in prices compared to the previous 14 cycles. The increase in positive dynamics is confirmed by the growth of RSI in June last year. The only alarming thing is that today this index is at 77. This exceeds the overbought trigger level (70) and contributes to the arrival of a correction.
Monitoring previous highs helps to apply the RSI. This is how the degree of acceleration of the pulse is determined. The index level for the week reached 84, which gives hope for a further strengthening of the positive momentum dynamics and another rise in the price of gold.
The growing trend is also heading upward. Back in January 2021, the 50-week moving average reached a crossover with the 10-week chart. The latter continued its growth. This indicates a tendency for further growth in the medium term.
How much will gold cost in 2022?
Many experts and analytical companies have already published forecasts for gold prices by month in 2022. For ease of reference, the average estimated values are shown in the table.
| Month | At the beginning, thousand dollars | At the end, thousand dollars. | Deviation per month, % |
| January | 1,82 | 1,79 | -1,65 |
| February | 1,79 | 1,87 | 4,47 |
| March | 1,87 | 1,8 | -3,74 |
| April | 1,8 | 1,78 | -1,11 |
| May | 1,78 | 1,72 | -3,37 |
| June | 1,72 | 1,72 | 0 |
| July | 1,72 | 1,82 | 5,81 |
| August | 1,82 | 1,87 | 2,75 |
| September | 1,87 | 1,91 | 2,14 |
| October | 1,91 | 2,03 | 6,28 |
| November | 2,03 | 2,03 | 0 |
| December | 2,03 | 2,03 | 0 |
Attention! The largest increase in value, according to analysts, in 2022 will be in July and October.
Technical Market Indicators
An expert analysis of the long-term dynamics of changes in the value of the precious metal is carried out with a preliminary assessment of the schedule per week. When trading, gold prices are in a sideways trend along with other instruments operating on the capital market. By using these levers, you can understand whether the price remains within the “norm” or is heading toward the trend.
According to data for the month of June last year, at that time the price of gold had reached its six-year high and was ready to set new records. This positive momentum is attributed to the generation of a crossover buy signal by the MACD (Moving Average Convergence Divergence) index. MACD has extremely important properties. This momentum index operates on a moving average, generating a cross signal describing the acceleration of momentum, both positive and negative. It is the weekly MACD price crossing that helps experienced traders notice the positive dynamics of changes in the price of gold.
Expert opinions on the price of gold in 2022
The majority of analysts are of the opinion that by the beginning of 2022 the price of gold will increase. In January, the rate, according to experts, will reach the following values:
- Aton - 2.25 thousand dollars per 1 troy ounce;
- Bank of America - $2.05 thousand per 1 tr. oz.;
- Goldman Sachs - $2.3 thousand per 1 tr. oz.;
- Citigroup - $2.1 thousand per 1 tr. oz.
Analysts from ABN Amro are of the opinion that the price of gold will begin to decline at the beginning of 2022. According to the forecast, in December 2021, the cost of 1 ounce will be $1.9 thousand. In mid-January 2022, the price will be reduced to $1.7 thousand.
A similar opinion is shared by several other experts from large foreign investment companies. Domestic analysts, on the contrary, consider gold to be a reliable asset suitable for storing savings. According to Russian experts, the dynamics of the exchange rate in 2022 will be as follows:
- January-February - 2.2 thousand dollars;
- March-May - 2.4 thousand dollars;
- mid-summer - $2.35 thousand;
- end of autumn - 2.05 thousand dollars;
- December - 2.1 thousand dollars
Attention! When making a forecast, analysts take into account the dynamics of the exchange rate over past years and factors that can and will definitely affect the price of the precious metal.
Experts explained the fall in gold prices amid the pandemic and crisis
At the very beginning of the pandemic crisis, many investors took advantage of the traditional method of protecting their assets and “went into gold.” While most assets on the stock market fell significantly in price last spring (with the exception, perhaps, of the main beneficiaries of the pandemic - securities of technology companies), gold prices rose rapidly and reached an all-time high of $2,056 per troy ounce on the London Stock Exchange
metals (LME) August 6, 2021. Then this precious metal began to lose in price: on December 31, 2021, gold already cost $1,894 per ounce. And according to the latest trading data (Thursday, August 19), it’s already $1,785.
“The price of gold has been declining for a year now, and this is a sufficient period of time to wonder what’s wrong with this asset,” said leading investment analyst Sergei Suverov in an interview with Gazeta.Ru.
Gold has a high inverse correlation with real yields on long-term US government bonds and the dollar, explains Sovcombank chief analyst Mikhail Vasiliev. That is, the lower real interest rates, the higher the price of gold, and vice versa.
“Gold reached its historical maximum in August 2020. At the same time, the yield on 10-year US government bonds reached its historical low of 0.51%, says Vasiliev. “Since then, market rates have been rising (the US 10-year rate is now approximately 1.23%) and the price of gold has been declining.”
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In theory, gold, as a protective asset in case of force majeure, should now continue to rise in price, since neither the pandemic nor the economic crisis have gone away. Moreover, billions of dollars and euros have been pumped into the global economy, and the dollar index against six major currencies has been declining recently. In such a situation, one would expect that investors would buy gold to further protect their assets.
“Gold is traditionally perceived as an anti-crisis asset; it is even called the “currency of fear.” Hopes for mass vaccination and the recovery of the global economy, which appeared just in August last year, led to a slow but sure fall in gold prices,” Suverov from Arikapital explains the current trend.
“One would expect the price of the precious metal to rise closer to $2,000 per ounce. But the dynamics of gold storage volumes in ETFs (Exchange Traded Funds) shows that increased interest from retail investors in gold has not returned,” says Vitaly Gromadin, senior analyst at BCS World of Investments.
Fluctuations in the price of gold this year are associated primarily with changes in investment demand, which is most strongly influenced by the change in rhetoric of the US Federal Reserve, says Olga Belenkaya, head of the macroeconomic analysis department of Finam Financial Group.
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“The minutes of the July Fed meeting published yesterday showed that the majority of the leadership of the American central bank considers it appropriate to begin reducing QE (a policy under which the regulator buys back or takes financial assets as collateral, in return injecting additional money into the economy - editor's note) before the end of the year. , if the economic situation continues to improve as forecast.
Expectations of a reduction in the volume of liquidity injections from the Fed and, possibly, an earlier rate hike, lead to a strengthening of the exchange rate
dollar and increase the cost of owning gold, making it less attractive to investors compared to government securities,”
- says Belenkaya.
Interest in gold or the dollar will be determined in the coming weeks: the market is waiting for clearer signals from the Fed at a symposium in Jackson Hole on August 26-28 and at the next regulator meeting on September 21-22, Belenkaya clarifies.
The European Central Bank, following the Fed, will also gradually begin to prepare markets for a reduction in QE, adds Vasiliev from Sovcombank. Market rates in euros will rise, therefore gold will become a less attractive asset, the expert is sure.
Downtrend
Another reason for the reduction in investment demand for gold is the emergence of effective vaccines against COVID-19 and some reduction in the uncertainty associated with the pandemic, Vasiliev believes.
“Demand for defensive assets has weakened due to the increasing pace of coronavirus vaccinations and large-scale monetary and fiscal stimulus.
In the second quarter, the third wave of COVID-19 in the world ended, economic data showed record gains, including due to the low base of 2021, and interest in gold weakened,”
- says Vasiliev.
He also believes that part of the global liquidity, which previously could have gone to investments in gold, is now being diverted to investments in cryptocurrencies.
“Investments in bitcoin, ether and other cryptocurrencies are popular among young investors who view crypto assets as an alternative to traditional assets, fiat currencies and gold,” says Sovcombank’s Vasiliev. In addition, for the first time since their inception, cryptocurrencies attracted the attention of large investment funds, which have recently been actively buying them as a defensive asset.
However, according to Pert Pushkarev from TeleTrade, cryptoassets are of interest only to a very limited part of traders who simultaneously love protection from risks, but also the risk itself.
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“Digital currencies are still used in a highly specialized shadow market segment that is not sufficiently protected by legislators. Based on this premise, Bitcoin, Ethereum, or even more so [DogeCoin] is a story about speculation, but not about investment,” Pushkarev explains his position.
There is another opinion
Although many experts predict a further decline in interest in gold, some of them are confident that the despised metal will retain its protective functions.
Chief economist of the Eurasian Development Bank and the Eurasian Fund for Stabilization and Development Evgeny Vinokurov says he does not see investors disappointed in gold.
“Gold is still perceived as a store of value - an asset that stores value. That is, the asset is not speculative, but rather protects against inflation, hedging the risks of other components of the distributed investment portfolio,”
- says Vinokurov.
However, the base scenario of the Eurasian Development Bank’s forecast includes “slightly downward dynamics” over the next 5 years, about $1,850 next year with a further decrease to $1,680 in 2026.”
“We believe that in 2022 the global economy will continue to recover from the coronavirus crisis, and inflation will gradually return to the target levels of central banks. The expected tightening of monetary policy by the Federal Reserve in 2022 and the recovery of the US economy will likely lead to higher market rates (the target for 10-year US government bonds is 2%).
Against this background, we expect continued downward sideways movement in gold. The estimated gold target for 2022 is $1600 – 1800 per troy ounce,”
— summed up Vasiliev from Sovcombank.
When is the best time to buy gold?
The period for acquiring precious metal depends on the purpose for which the asset will be used. To save your savings, you can buy gold now. It, compared to the Russian ruble, has a much lower level of volatility. Investments in the precious metal will protect funds from the effects of inflation and possible depreciation of the national currency.
If an investor wants to make money on the difference in rates, then it is also better to buy gold now, but not for the entire amount of capital. There will be several favorable periods in 2021 to buy at low cost. According to forecasts of foreign analysts, the price of the precious metal will decrease in June-July, which will be a signal to buy gold.
Important! You can sell the precious metal to make money on the exchange rate difference at the beginning and end of 2022.
Results
In 2022, gold will be one of the most reliable assets for investment. With its help, you can not only protect your savings from inflation, but also make money on exchange rate differences. According to analysts, in January 2022 the price for 1 ounce will be 2.1-2.3 thousand dollars. By mid-summer, the cost of the precious metal will drop to 1.7-1.8 thousand dollars. You can buy gold now, to protect savings from possible depreciation of the ruble.
What are the gold market players up to?
There are special methods for determining the mood present in the gold market. Analysis of the reporting data published by the Commodity Futures Trading Commission "CFTC" entitled "Trader Commitments" is the most reliable indicator in this case. With its help, an understanding of market dynamics is achieved.
Information on positions in various sectors is presented in the COT reports. This data is clearing and brokerage. Experts' forecasts regarding subsequent changes are made regardless of the factors affecting the trader's position, which remain hidden.
Positions are divided by sector. For gold futures and options, this includes the categories of so-called swap dealers, reporting data and managed funds. Swap dealers include regular and investment banks, as well as industry merchandisers. Investment funds of a mutual and pension nature, as well as hedges, are classified as managed funds. The rest of the reporting is done by retail companies.
Information about the reasons for each position is not available to CFTC specialists. It does not affect the classification of specific traders. Thus, CFTC employees are not aware of a dealer's hedging or swap speculation position. It is not this that is important, but understanding the reason for increasing or decreasing the position.
For experienced traders, the important assumption is that “swap” dealer positions are influenced by hedging transactions with gold producing and processing companies. They are compensated through speculative market positions. Sentiment data is derived from the positions held by the funds being managed. There are two main approaches here:
- According to the prevailing trends.
The approach assumes that the price of gold goes up when long positions increase in large specifications or managed cash according to COT data. Negative sentiment prevails when they increase short positions. - By opening short or long positions in managed funds.
When these areas expand excessively, we can expect too much positive sentiment with a subsequent pullback in prices.
How to buy bullion at Sberbank
- Find on the map the nearest Sberbank office offering bullion sales services. To do this, you can use a special search service on the official website of the company sberbank.ru. Click “Select services”, then about – sale.
- Visit the branch of your choice in person, be sure to take your passport or other identification document with you.
- At the entrance to the office, take a ticket to get to the specialist you need,
- Conclude an agreement to purchase precious metals, deposit money through the cash register. It’s convenient that you can pay for your purchase by non-cash method.
It is noteworthy that you do not necessarily need to visit a bank branch in order to purchase gold, silver or other precious metals. At the moment, Sberbank offers its clients to use SBOL, i.e. Remote services are available in order to transfer your savings into the desired metal.
This can be done with:
- Internet banking on a computer,
- mobile application,
- ATM,
- other self-service devices.
