Before buying physical gold and precious metals, gold investors usually have questions such as: what drives the gold price? Will gold go up or down in 2022? Is now a good time to buy gold?

This is quite normal since, like with any other asset, they want to consider all aspects before investing.

But while we cannot be certain how gold will perform in 2022, annual precious metals forecasts can show the possible direction the gold price might take in response to certain market drivers.

To help you understand where precious metals prices could go in 2022, let’s look at the comprehensive outlook by Nicky Shiels, Head of Metals Strategy at MKS PAMP GROUP.

It will cover the following topics:

  • Key drivers for precious metals
  • Gold price outlook 2022
  • Silver price outlook 2022
  • Platinum price outlook 2022
  • Palladium price outlook 2022

Key drivers for precious metals in 2022

As for any other asset, precious metals depend on certain driving forces that will move their price up or down.

For example, the gold price is driven by multiple economic and political factors, including the movement of the U.S. dollar, inflation, investor sentiment, and geopolitics.

    The prices of silver, platinum, and palladium, on the other hand, will more largely depend on industrial demand. Due their unique qualities, these metals are especially valuable in the industrial sector.

    Nicky Shiels sees 6 main drivers for precious metals prices in 2022:

    • Rising inflation
    • Supply chain issues
    • Investor risk sentiment
    • Geopolitics
    • Climate action
    • U.S. dollar outlook

    Here are her key takeaways for the 2022 precious metals drivers.

    Driver #1: High inflation

    • There’s a growing risk of a hyperinflation depression in Russia and a recession for the region / Europe.”
    • “The ongoing regime change – from globalism to isolationism and the associated inward looking trade policies – is exacerbated by the war [in Ukraine] and is inflationary.”
    • “The markets have inflation because the Fed targeted (thus actually wanted) inflation […] The Fed will more likely than not wrongfoot the exit.”
    • “Expansionary global fiscal policies, potential social unrest, unsustainable US debt path, continued protectionist trade policies, rising transportation costs & increasing supply-chain risk all indicate structural & stickier inflation.”

    To sum up her thinking, all signs suggest that inflation will continue to take it’s toll on the global economy, exacerbated by the protracted war in Ukraine and continued supply chain problems.

    To understand what an increase in consumer prices could mean for gold, read our SPOTLIGHT article on the subject.

    Driver #2: Geopolitical uncertainty/the war in Ukraine

    • “The frequency of geopolitical events (Iran/Middle East/North Korea) is rising after a chaotic Afghanistan withdrawal causing US humiliation.
    • “The macro backdrop has changed significantly since January forecasts by the [Wall] Street, with renewed geopolitical risks impacting both the growth and inflation outlook.”
    • “One must thus make a few assumptions about Ukraine’s war; we do not think that it will be fully resolved during 2022.”
    • US counted on to NOT intervene in potential future geopolitical skirmishes (Russia / Ukraine, China / Taiwan, etc.), driving the need for more tactical tail-risk hedging.”
    • “The threat of social unrest is also on the rise […] especially in middle-income countries given vaccination disparities and a mishandling of COVID waves.”

    Geopolitical uncertainty and rising tensions can end up impacting the gold price and even push it up, as many investors prefer buying gold during uncertain times.

    And it seems that the ongoing war in Ukraine has been pushing more and more investors to hedge their portfolios with safe-haven assets like physical gold.

    Driver #3: Investor risk sentiment

    • “The renewed safe-haven buying in the form of ETFs and physical investment demand, as Gold acts a geopolitical / inflation / recession / arbitrary confiscation hedge, will keep prices elevated so long as the Fed does not drastically hike real rates into positive territory.”

    In other words, investor risk sentiment will grow together with mounting geopolitical and inflation concerns.

    Persisting investor interest in gold and precious metals could potentially push the price of gold higher, according to Nicky Shiels.

    Driver #4: Supply chain risks

    • “Completely dependent on pervasive COVID/virus.”
    • “Government policies and outbreaks in low vaccination regions causing bottlenecks & supply disruptions, unsynchronized COVID cycles with unpredictable demand trends, relentless V-shaped* US demand for goods.”

    *V-shaped demand is demand seeing a sharp decline, followed by a fast and strong rebound.

    The global supply chain has been strained lately as a result of the Covid pandemic, making many physical gold investors worried about the possible implications for the global economy. And it looks like all this supply chain chaos could get worse if Covid risks persist.

    A chaos that could further fuel the current rise in prices while slowing down the global economic recovery.

    Driver #5: Climate action

    • Nicky sees “large ‘transition risks’ associated with decarbonizing the world […]. These arise if governments pursue tougher climate policies forcing the economy to restructure and for capital to move away from ‘dirty’ towards ‘cleaner’ sectors.”
    • “But the commitment to ESG [Environmental, Social and Governance], energy transition etc. – is an overall cost-push and underpins structural higher inflation*.”

    *Structural inflation is the type of inflation that results from changes in the structure of demand and supply.

    The commitment of some countries to shift to cleaner energy sources could push up inflation as the price of some energy sources (like carbon, for example) will go up.

    But, on the other hand, this transition to green energy could benefit precious metals such as silver, which has unique qualities vital for the production of solar cells used in the production of electricity.

    Driver #6: U.S. dollar outlook

    • “Given its reserve currency status & historical resilience into typical ‘macro uncertainties’ […] its still cheap. Technically it remains very contained and is somewhat fairly priced.”

    The U.S. dollar usually acts as one of the key drivers of the gold price: roughly speaking, if the greenback goes down, the price of gold usually goes up. But, so far, it looks like the U.S. dollar’s impact on gold remains limited.

    So, to sum up, we see 3 key drivers for precious metals prices that are likely to be in place in 2022: higher inflation, the war in Ukraine, growing investor risk sentiment.

    And if the other 3 factors mentioned by Nicky Shiels are not as active right now, they should still be followed closely by gold and silver investors. If they were to play a key role next year, they are likely to end up influencing gold or silver prices as well.

    Now let’s look at what scenarios Nicky sees for precious metals prices in 2022.

    Precious metals price forecast for 2022

    With inflation worries growing stronger over the past months, precious metals, especially gold, have been reflecting investors’ sentiment about inflation quite well.

    As investors initially supported the Fed’s “transitory inflation” mantra, the gold price ended up staying rather flat over the last few months.

    But as fears grew stronger, and with inflation hitting a new 30-year high in October, gold, silver, and platinum prices soared, responding to surging consumer prices and deteriorating investor sentiment.

    To see if this upward trend is likely to continue in 2022, read Nicky’s price estimates for each precious metal below.

    Gold price outlook for 2022

    Average: $2,000/oz

    Low: $1,600/oz

    High: $2,500/oz

    Probability: 50%

    Nicky’s “ingredients” for a bullish case scenario:

    • Accelerating stagflation* narrative.
    • Persisting inflation risks & fears.
    • The Fed’s inability to control inflation and growth slowdown.
    • New trade and geopolitical risks.
    • Supply chain bottlenecks or higher energy prices drives sustained inflation risks & fears, triggering renewed investment inflows.
    • Asian or central banks’ physical demand is stronger than expected.

    *Stagflation is a persistent high inflation combined with high unemployment and stagnant consumer demand.

    Nicky also outlines the bullish and the bearish cases for the gold price in 2022:

    Bullish case: ~$2,500/oz. The probability of this scenario, according to Nicky Shiels, is 30%.

    Bearish case: ~$1,600/oz. The probability of this scenario is 20%.

    Click here to see the current gold price and set up your market alerts.

    Silver price outlook for 2022

    Average: $25/oz

    Low: $18/oz

    High: $26/oz

    Probability: 50%

    Bullish case: ~$30/oz (probability: 20%).

    Bearish case: ~$12/oz (probability 30%).

    Nicky’s “ingredients” for a bullish case scenario:

    • Gold outperformance.
    • Inflation and reflation* risks.
    • Real industrial demand drivers picking up speed in the medium term.
    • Shortage and stockpiling issues due to persistent supply chain risks.

    *Reflation is a monetary policy designed to increase production and stimulate spending after a period of economic uncertainty or a recession.

    Click here to see the current silver price and set up your market alerts.

    Platinum price outlook for 2022

    Average: $1,100/oz

    Low: $850/oz

    High: $1,350/oz

    Probability: 50%

    Bullish case: $1,350+/oz (probability: 30%).

    Bearish case: $800/oz (probability 20%).

    Nicky’s “ingredients” for a bullish case scenario:

    • Earlier chip shortage “resolution” injecting *pent-up demand on lower stock availability.
    • Accelerating heavy-duty vehicle demand and substitution.
    • Hydrogen demand prospects brought forward by accelerating investor demand.

    *Pent-up demand refers to a situation where demand for a product is unusually strong. Economists generally use the term to describe the general public’s return to consumerism following a period of lower spending.

    Click here to see the current platinum price and set up your market alerts.

    Palladium price outlook for 2022

    Average: $2,000/oz (probability: 50%)

    Low: ~$1,500/oz (probability: 25%)

    High: ~$2,500/oz (probability: 25%)

    Nicky’s “ingredients” for a bullish case scenario:

      • Palladium should remain elevated in the first half of 2022 as supplies of this metal from Russia may fall due to the war in Ukraine. Also, potential further sanctions on Russia and reputational risk in holding Russian material could also be supportive for the price of palladium.
      • Earlier chip shortage ‘resolution’ injecting pent-up demand on lower stock availability.
      • Accelerating auto demand & restocking on dips.
      • Stricter emission regulations, offsetting lower production (chip shortage).

      Click here to see the current palladium price and set up your market alerts.

      What’s the bottom line

      According to Nicky’s forecast, it looks like all four precious metals could have a good chance to shine in 2022.

      Most likely, gold might well profit and get a boost as a safe-haven asset by ever-growing inflation fears, investor risk sentiment as well as geopolitical risks. The silver price, on its part, might benefit from the ongoing transition to cleaner energy, with silver being a vital element in green energy technologies.

      Platinum and palladium, as rare metals used by carmakers to reduce harmful vehicle emissions, are likely to profit from recovering car demand and stricter emission regulations, among other factors.

      In any case, considering the last two years we’ve had, it’ll be interesting to see how 2022 unfolds. But in the meantime, with a still-unclear global economic situation and persisting inflation fears, investors could probably think of protecting their wealth with a safe-haven asset.