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Will gold and silver become outcasts for investment in 2022?

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Relevance up to 09:00 2022-01-05 UTC+00

2021 has been a disappointing year for precious metals investors at least in terms of price characteristics. Gold and silver lagged behind the stock market and the general commodity indices.

Gold showed signs of growth in the spring, but prices returned to almost the same range by the end of the year. The precious metal declined about 3% over the year.

As for silver, its prices fell more than 9% in 2021.

Silver outperformed gold in the second half of the year as prices did not reflect rising industrial demand. Production volume has recovered from the pandemic lows of 2020. However, the Silver Institute predicts that there will be a supply shortage in 2022.

Such bullish dynamics of supply and demand will result in some large upward price movements at some point. Now, the prices are good for investors in silver.

Platinum is also attractive for investment. The platinum market has fallen by about 10% in a year.

Finally, palladium suffered the biggest drawdown in the past year. It closed at just under $ 2,000 an ounce before the New Year after rising to a new all-time high of $ 3,000 in the spring. It was significantly below the lows a few weeks ago.

Despite the fact that inflation reached a multi-year high in 2021, Wall Street considered metals to be outcasts. The S&P 500 index is breaking new records after a new one, reducing gold’s attractiveness.

Stocks thrive on optimism, while gold tends to increase pessimism.

Apparently, investors believe that the economy will continue to recover, instead of entering a stagflation period.

However, the so-called recovery is an illusion in many ways. Stagnation and inflation are prime economic realities for the millions of Americans who do not participate in Fed-fueled bull markets.

In addition to rising inventories, the housing market rose by almost 20% in 2021. This is great news for homeowners and terrible news for anyone trying to save on a down payment.

Their cost of living exceeds their earnings, but their economic woes are not fully reflected in the Consumer Price Index, which does consider actual house prices and uses various other statistical tricks to keep inflation low.

However, the CPI rose to its highest level (6.8%) last year since 1982. Average hourly wages for the year increased by 4.8%. This represents a 2% loss in purchasing power when measured by the CPI.

For ordinary Americans, the Fed’s policy has contributed to an increase in the cost of living. They steadily reduce the value of savings held in bank accounts or invested in bonds.

The decline in the purchasing power of the currency is not a temporary phenomenon. This is a constant feature of the monetary system.

Precious metals have had a bad year. Nevertheless, the centuries-old track record of gold and silver in maintaining purchasing power is unmatched.

Their record of price increases over the past two decades alone suggests that metals have the potential to recover and improve in the coming years, especially if stagflation becomes the dominant economic theme starting in 2022.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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