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The World Gold Council (WGC) has released its 2022 mid-year outlook report, advising investors to remain cautious as volatile market conditions are expected to continue into the second half of the year.
The World Gold Council (WGC) has released its 2022 mid-year outlook report, advising investors to remain cautious as volatile market conditions are expected to continue into the second half of the year.
The report says investors are facing a challenging environment due to high inflation, geopolitical instability and rising interest rates that cause gold to “remain reactive” to rapid rate swings.
The conditions are also dictated by the tightening of monetary policy by central banks around the world in response to inflation.
However, the WGC report noted that despite the volatile market conditions, gold is expected to retain its value as a hedging asset over the long term, suggesting that declining performance in stocks and bonds could be positive. for gold.
During the first half of the year, the price of gold began to rise following the Russian invasion of Ukraine, with investors looking for hedging assets, such as gold. Historically, gold has performed well as an investment during times of high inflation.
The price of gold rose 0.6% at the end of June compared to the performance of the previous year.
Going forward, the WGC sees higher nominal rates and potentially higher dollar value as the biggest challenges in the second half of 2022.
At the same time, investor demand for liquid hedging assets amid continued market volatility, as well as high levels of inflation, will increase the odds that gold will remain valuable.
The WGC added that while most markets are expecting significant hikes in policy rates, analysts on the board have argued that central banks could minimize changes in monetary policy to avoid economic meltdowns and subsequent contractions.
Late last month, the G7 – the US, UK, Canada, France, Germany, Italy and Japan – confirmed their intention to ban the import of gold newly mined or refined from Russia in punitive response to the invasion of Ukraine.
Russia provides around 10% of the world’s gold supply and has reserves valued at $140 billion. Earlier this year, the United States and the United Kingdom, among other political powers, banned the import of Russian diamonds, causing major disruptions in the international jewelry trade.
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