3 Gold Mining Stocks to Buy as Experts Expect Gold Rally in 2022

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We are in the last trading week of 2021 and gold is currently trading at around $1,813 an ounce. The metal has held its ground lately as the spread of the Omicron variant has renewed fears that it might derail the ongoing global economic recovery. It has also quelled investors’ appetite for riskier assets, thus lifting bullion’s safe-haven appeal and bringing investors back to gold.

Gold is anticipated to gain further in 2022 on the back of uncertainty regarding the coronavirus variant, continued inflation and geopolitical tensions; we suggest buying stocks like Seabridge Gold SAFury Gold Mines FURY and US Gold Corp USAU.

Gold’s Run So Far This Year

Gold’s sailing has not been smooth this year due to a myriad of reasons — the rollout of vaccinations, ongoing economic recovery, lack of investment demand and consistent dollar strength. The yellow metal has shed its value 4.3% so far this year, suggesting that it is headed for the first annual loss since 2018. This is in stark contrast to last year’s growth of 24.6% — the strongest annual increase in a decade. The stellar performance was primarily due to the safe-haven demand stemming from the uncertainty amid by the COVID-19 pandemic and low interest rates. Gold had even crossed the $2,000 an ounce milestone — the first time in history.

Gold has averaged around $1,806 an ounce so far in 2021. Gold prices have been weighed down mainly by low investment demand for a major part of the year, which overshadowed strength in demand in other sectors. Jewelry demand has been high aided by the ongoing global recovery. Technology demand has also been on the rise and back to pre-pandemic levels, driven by the continued recovery in electronics. On the supply side, even though mine production has picked up steadily owing to fewer COVID-19 production interruptions compared to last year, recycling activity remained weak due to lower gold prices.

The lack of a spike in gold prices made investors apathetic toward the yellow metal. It was a solid year for equities, with all major market indexes racking up healthy returns year to date. A stronger greenback has not helped either, as the U.S. dollar and gold prices are generally inversely correlated. The U.S. dollar index is up around 7% this year. A stronger US dollar offsets higher inflation expectations and stable interest rates, preventing the precious metal from holding onto the gains. Also, several market commentators are suggesting that investment flows may have switched from gold to cryptocurrencies this year.

On a positive note, per the latest report by the World Gold Council, gold exchange-traded funds (ETFs) saw inflows of 13.6 tons ($838 million) in November — the first month of positive flows since July. Global gold-backed ETF holdings recovered from the year-to-date lows seen in October to 3,578 tons ($208 billion) in November. This was driven by the resumption of investment demand for larger gold ETFs amid decades-high inflation and heightened market volatility. Central banks in developed markets added to their gold reserves for the first time since 2013, per the World Gold Council. This holds promise for gold.

Expectations for 2022

According to experts, the negative risk appetite, fueled by the Omicron worries and US Treasury yields being low that reduce the opportunity cost of holding bullion, will support gold prices in 2022. The Omicron-led uncertainty could lead to a more dovish central bank stance in 2022. Issues over the domestic investment bill and the geopolitical risks around Ukraine will also boost gold’s appeal.

The personal consumption expenditures price index (PCE index), one of the main measures of inflation and consumer spending trends in the U.S. economy, surged 5.7% in November, reflecting increases in both goods and services. This was the highest since 1982. The Consumer Price Index, another key inflation metric rose 6.8% in November, also the highest since 1982. This has bolstered expectations that elevated inflation is likely to persist. Gold is widely considered as a hedge…


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