According to Wells Fargo, gold could rank among the best-performing assets of last year and among the best of 2022. In its updated gold price outlook, Wells Fargo says it expects gold to start an exit rally to new record highs after ending the year with the worst drop since 2015, down 3.6%. Wells Fargo investment strategy analyst Austin Pickle’s market comments and Wells Fargo’s gold forecasts have been prepared for Somanews readers.
According to Austin Pickle, this could lead to a return to safe harbor.
Wells Fargo analyst Austin Pickle points out that some of the biggest headwinds to gold prices over the past year have been the greater risk sentiment in the US stock market, the higher US dollar, and the idea that high inflation is temporary:
There have been several significant headwinds for gold in 2021. The most important of these was a sharp risk rally with little volatility, a strengthening US dollar, and real interest rates hitting a bottom. Add to this is inflation, which is assumed to be temporary for most of the year, rising cryptocurrency prices, and increasingly optimistic investors and economic outlooks.
However, one of the biggest shifts this year is the idea that returns on risky assets will now be limited or even endangered, as the US stock market looks much more cautious after the January plunge. Austin Pickle explains it this way:
Risky asset returns could be more volatile this year with higher volatility, causing a return to perceived safe-haven gold. The bullish commodity supercycle will also lend its support, as it is the tide that lifts all commodity boats.
Wells Fargo: Our 2022 year-end gold target is $2,000-2,100
On top of that, Wells Fargo’s US dollar outlook suggests that the dollar’s pressure on gold will ease in 2022. “And our range-bound US dollar outlook suggests that the dollar will stop being a headwind this year,” comments Austin Pickle.
According to the outlook, these macroeconomic changes are likely to encourage more gold purchases throughout the year. Wells Fargo expects gold to be between $2,000 and $2,100 by the end of the year:
Risks remain, including the possibility of increasing interest rates. Still, if the precious metal breaks the technically and psychologically important $1,900 level, we expect 2022 to be a very good year for gold. Our target for the end of 2022 gold price is $2,000-2,100.