FX.co ★ Commodity market's rise supports gold

In January, gold is experiencing high volatility. Rare spikes interchange with prolonged declines. At the moment, the precious metal is trading within a downward channel. Gold is stubbornly trying to break through it.

Gold rose slightly to $1,822 earlier this week. On Tuesday, January 18, the precious metal was trading at $1,819. On Wednesday, January 19, it was hovering in the $1,814-$1,815 range, sliding down a bit.

Experts fear that a breakout of the upward support near $1,800 may increase the volatility of gold prices. Large sell-offs in the markets, which affect almost all assets, worsen the situation. Further sales of securities may send the precious metal to $1,760-$1,770. Analysts warn that if gold pierces this range, the price may drop to $1,680.

Recently, gold has been strengthening amid a decline in stock markets. Economists expect this trend to continue this year. They believe that the current decline in gold prices is temporary, but we should not rest on our laurels. Growth in demand for the precious metal is triggered by uncertainty in the markets, and now the situation is becoming clearer. The Fed has decided on monetary policy for 2022, and other central banks are likely to follow suit. As a result, the situation for gold is unfavorable because demand for it is declining.

Gold remains under pressure from rising US government bond yields, making it less attractive as a safe haven asset. At the same time, investors are concerned about the pandemic and the spread of the omicron strain. Against this background, risk appetite is decreasing and investors' attention is focused on hedging assets.

Currency strategists at TD Securities believe the price of gold may rise in early 2022, despite the Fed's hawkish policy. According to analysts, the high level of inflation and expectations of Fed's rate hike inflated the short positions on gold and kept prices at $1,790. Experts are confident that the precious metal will trade in the low range near $1,600 this year. Most experts agreed with such forecasts, believing that in 2022 the lowest price for gold is likely to amount to $1,675, the highest price is at $1,965, while the average may remain close to $1,800.

Gold prices largely depend on the commodity and energy markets. The global energy crisis, which has been going on for a long time, contributes to gold's hike in price. Experts fear an impending energy collapse already starting in Europe. Sharp rise in gas prices and general appreciation of the commodity market may push gold prices to new heights. The precious metals market is on gold's side, but we should not expect a long and continuous rise in the asset.