In summary,

Base case for 2Q22 (50% probability) Gold at $1,900/oz

  • Gold has made only limited gains in 2021 despite low rates and high inflation, which does not bode well for the metal's prospects.
  • our rates strategists do not expect Fed interest rates hikes before 2Q22
  • This, combined with our economists' above-consensus inflation forecast, points to negative real rates; a perfect mix for gold.
  • ETF holdings are only 11.6% below their recent record, and still much higher than the average for the past decade. This indicates that investors have limited dry powder to allocate large amounts to gold, which we estimate should limit the rise to $1,900/oz for 2Q22.

Upside economic scenario for 2Q22 (25% probability): Gold at $1,700/oz

  • upside economic scenario would be bearish for gold as it assumes new COVID strains are effectively combatted via high vaccination rates and drug treatments. This would reduce risk-off sentiment, which is detrimental for gold, but more importantly would lead to easing of restrictions and thus higher services consumption.

Downside economic scenario 2Q22: (25% probability): Gold at $2,100/oz

  • Our downside economic scenario would be bullish for gold as central banks around the world would have to keep monetary policies highly accommodative

Weekly candles, gold:

Gold price chart

Feel free to add your gold outlook in the comments!