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December 21, 2021

Is Gold A Buy In 2022?

Frank Cabibi

12/21/2021

Gold's performance has been mostly red after mixed signals from the Fed and heavy volatility towards the holidays has taken its toll on the precious metal. Discussions and outlook remain uncertain as price action remains unpredictable.

Global market outlook

Mixed

  • Because analysts can’t figure out a clear Fed decision on interest rates, they don’t know how to price in both gold and the US dollar
  • Global inflation adds to the bullish case
  • Raising interest rates would negatively affect gold, but the expected rise is arguably still “gold-friendly”
  • Investor sentiment usually favors the dollar over the metal

Retail sentiment

  • Majority of retail traders are long gold
    • Some traders like to follow sentiment and buy when mostly retail buys, however, it’s very common to see institutions doing the opposite of retail
    • And this trend can continue for a long time

Our bias

The market is too mixed right now to really pick a clear direction, at least for the entire year of 2022. Without a clear statement from the Fed, we can only measure the possibilities. It looks like the metal may start off bearish in 2022, after looking at the behavior in the COT reports along with the announcement from Biden to keep the economy open regardless of the new omicron variant.

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