We are in the last week of trading of 2021 and gold is currently trading at around $ 1,813 an ounce. The metal has held firm in recent times as the spread of the Omicron variant has rekindled fears that it could derail the ongoing global economic recovery. It has also appeased investor appetite for riskier assets, raising bullion’s appeal as a safe haven and pulling investors back into gold.
Gold is expected to continue to gain in 2022 due to uncertainty over the coronavirus variant, continued inflation and geopolitical tensions; we suggest to buy stocks like Sea bridge gold HER, Gold Mines of Fury FURIE and American Gold Company USAU.
Gold’s Run so far this year
Gold’s navigation has not been smooth this year for a multitude of reasons – the rollout of vaccinations, the ongoing economic recovery, lack of investment demand and the continued strength of the dollar. The yellow metal has lost its value 4.3% so far this year, suggesting that it is heading for the first annual loss since 2018. This is in stark contrast to last year’s 24.6% growth, the largest annual increase in a decade. The exceptional performance is mainly due to the demand for safe havens resulting from the uncertainty associated with the COVID-19 pandemic and low interest rates. Gold had even crossed the $ 2,000 an ounce mark – the first time in history.
Gold has averaged around $ 1,806 an ounce so far in 2021. Gold prices have been dragged down primarily by weak investment demand for much of the year, which eclipsed the strength of demand in other sectors. Demand for jewelry has been high thanks to the ongoing global recovery. Technological demand has also increased and returned to pre-pandemic levels, driven by the continued recovery in electronics. On the supply side, even though mining production has steadily increased due to fewer COVID-19 production interruptions compared to last year, recycling activity has remained weak due to the decline in gold price.
The lack of a spike in gold prices has made investors apathetic towards the yellow metal. It has been a solid year for stocks, with all major stock indexes posting healthy returns since the start of the year. A stronger greenback hasn’t helped either, as the US dollar and gold prices are generally inversely correlated. The US dollar index is up about 7% this year. A stronger US dollar offsets higher inflation expectations and stable interest rates, preventing the precious metal from holding onto gains. Additionally, several market commentators suggest that investment flows may have shifted from gold to cryptocurrencies this year.
On a positive note, according to the latest World Gold Council report, gold exchange-traded funds (ETFs) registered 13.6 tonnes ($ 838 million) inflows in November – the first month of positive flows since July. Global holdings of gold-backed ETFs recovered from lows in October to reach 3,578 tonnes ($ 208 billion) in November. This is due to the recovery in investment demand for larger gold ETFs amid decades of high inflation and heightened market volatility. Central banks in developed markets increased their gold reserves for the first time since 2013, according to the World Gold Council. This is promising for gold.
Expectations for 2022
According to experts, negative risk appetite, fueled by Omicron concerns and low US Treasury yields that reduce the opportunity cost of holding bullion, will support gold prices in 2022. The uncertainty induced by Omicron could lead to a more accommodating stance of the central bank in 2022. Problems related to the domestic investment bill and geopolitical risks around Ukraine will also increase the attractiveness of gold.
The personal consumption expenditure price index (PCE index), one of the main measures of inflation and consumer spending trends in the U.S. economy, jumped 5.7% in November, reflecting increases in goods and services. It was the highest since 1982. The Consumer Price Index, another key measure of inflation, rose 6.8% in November, also the highest since 1982. This raised expectations, according to which high inflation is expected to persist. Gold is widely viewed as a hedge against inflation and market uncertainties.
In 2022, the demand for gold will be supported by growing demand for jewelry and technology and central bank purchases. The demand for physical gold is seasonally higher from the end of the year, favored by the festival and wedding season in India, followed by the Chinese Lunar Year and Valentine’s Day. Demand in India has been strong lately due to pent-up demand, improving economic dynamics and consumer confidence.
India and China, which account for around 50% of consumer demand for gold, will continue to support gold demand. The use of gold in energy, healthcare and technology is increasing. Thus, there will be a possible imbalance between supply and demand which is likely to lower gold prices, which bodes well for the industry.
We’ve handpicked three gold stocks, which carry a Zacks Rank # 2 (Buy) and are set to perform well in 2022. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
3 gold shares to buy
Sea bridge gold: The Company owns a 100% interest in several North American gold resource projects. The company’s main assets are the KSM and Iskut properties located near Stewart, British Columbia, Canada and the Courageous Lake gold project located in the Northwest Territories of Canada. KSM is the world’s largest undeveloped gold resource project. The Snowfield acquisition is expected to increase KSM’s existing reserves and improve project profitability. The company recently embarked on an exploration and drilling program at Iskut, which continues to point to an important potential gold-copper porphyry system. It intends to further explore the Iskut, Snowstorm and 3 Aces projects with a view to selling or entering into joint venture agreements with large mining companies. The company’s debt-free balance sheet gives it a competitive advantage.
Seabridge Gold ranks first in gold and copper reserves among the major listed gold companies. From 2003 to 2020, the company’s gold resources increased by 915%. It strives to provide shareholders with exceptional leverage in the face of rising gold prices. Over the past 60 days, Zacks’ consensus estimate for company earnings in 2022 has risen 18%.
Gold Mines of Fury: The Company is a Canada-focused gold exploration company strategically positioned in three prolific mining regions: James Bay (Quebec), the Golden Triangle (British Columbia) and the Kitikmeot region (Nunavut). It recently reached an agreement to divest its 100% interest in the Homestake Ridge gold-silver project, which will simplify its portfolio. The company recently announced the results of expansion drilling at the Three Bluffs deposit at its Committee Bay project in the Kitikmeot region of Nunavut. These are the best drilling results the project has seen in five years and present a very promising achievement for the project. The high-grade hole opens up significant expansion opportunities and confirms that Committee Bay represents a major gold exploration opportunity. He provided the results of six core drill holes for the Eau Claire project located in the territory of EeyouIstchee in the James Bay region of Quebec. Drilling focused on demonstrating the potential for the deposit to expand westward to the Hinge and Limb target areas, indicating that this resource has room to grow.
Fury Gold continues to aggressively grow and advance its multi-million ounce gold platform through careful project evaluation and exploration excellence. It has set itself the goal of devoting at least 70% of funds to exploration and drilling activities. Zacks’ consensus estimate for company earnings in 2022 shows 27% year-over-year growth. Over the past 60 days, estimates have increased by 5%.
American Gold Company: USAU is a United States-focused gold exploration and development company developing high potential projects in mining-friendly jurisdictions of Wyoming, Nevada and Idaho. Its exploration efforts combine deep experience with cutting edge cutting edge technology to help it achieve exploration success. He is advancing the CK gold project located in southeastern Wyoming. The company recently provided a pre-feasibility study (âPFSâ) for its CK gold project and released its summary of the SK-1300 technical report. The project appears to be very attractive with a robust project economy. It currently has proven and probable mineral reserves of 1.01 million ounces of gold and 248 million pounds of copper. Its strong liquidity position and lack of debt position it well for growth.
Over the past 60 days, Zacks’ consensus estimate for 2022 earnings has risen by 33%. Estimates currently show year-over-year growth of 17%.
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Seabridge Gold, Inc. (SA): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.