Chennai: While gold will face headwinds in 2022 from higher nominal interest rates and stronger dollar, the negative effect of these factors may be offset by high inflation, market volatility and demand from central banks and jewellers.
However, gold will remain relevant as a risk hedge for investors this year, says the World Gold Council.
According to the WGC, inflation will remain high, partly stemming from the unprecedented monetary and fiscal policies put in place to alleviate the effects of the pandemic.
Lingering supply-chain disruptions from the Covid waves, tight labour markets and higher average savings from 2020, which have contributed to lofty valuations in various financial markets and high commodity prices, will keep inflation high.
Gold has historically performed well amid high inflation. In years when inflation was higher than 3 per cent, gold's price increased 14 per cent on an average.