AFTER a strong start to the year, gold prices will drift lower in 2022 and 2023 as central banks raise interest rates, lifting bond yields and making non-yielding bullion less attractive, a Reuters poll showed.

       Gold is traditionally seen as a safe place to invest and typically does well during times of low or zero interest rates.

       It hit a record high of US$2,072 (RM8,703) an ounce in 2020 when interest rates were cut during the coronavirus pandemic, but fell as economic growth recovered, stock markets rallied and central banks began to signal rate rises.

       Gold traded around US$1,800 (RM7,558) an ounce on Thursday.

       The median forecast from a poll of 39 analysts and traders showed the metal is expected to average US$1,802 (RM7,569) an ounce during the January-March quarter, US$1,770 (RM7,432) in the second quarter, US$1,775 (RM7,456) for the full year and US$1,653 (RM6,927) for 2023.

       A similar poll three months ago predicted prices would average US$1,800 (RM7,558) in the first quarter and US$1,750 (RM7,348) for the full 2022 year.

       In 2021, gold prices averaged US$1,799 (RM7,554) an ounce.

       “The United States real rates (inflation-adjusted yields on government bonds) should turn positive by the end of 2022 and see gold’s Goldilocks moment passing,” said Societe Generale analyst Florent Pele.

       Real US yields have been negative since the start of 2020.

       Some analysts said strong demand for physical gold, including from central banks building their reserves, would support prices.

       High inflation could also help gold because although it encourages central banks to raise interest rates, some investors see gold as an inflation hedge.

       For silver, prices are expected to average US$22.96 (RM96) an ounce this year and US$21.80 (RM91) in 2023, the poll found.

       Silver averaged US$25.12 (RM105) last year. It is currently trading at around US$23 (RM96) an ounce.

       The metal is used both as a safe-haven asset similar to gold and by manufacturers of goods including solar panels, automobiles and electronics.

       “Pent-up auto demand and growth in the solar sector should set a solid floor for silver prices,” said Standard Chartered analyst Suki Cooper. “Yet silver is likely to face the same macro headwinds as gold.”

       Global demand for gold rose 10% last year but remained well below its level before the Covid-19 pandemic amid slack investor demand, the World Gold Council (WGC) said in a report on Friday.

       A surge in jewellery purchases at the end of 2021 pushed demand in the fourth quarter to the highest level since April-June 2019, the WGC said.

       Gold buying by central banks rebounded last year and purchases of small bars and coins were the highest since 2013, but investors in exchange-traded funds sold more bullion than they bought, weakening overall demand.

       Total demand for gold in 2021 was 4,021 tonnes, up from 3,659 tonnes in 2020 but well below the average during the 2010s of around 4,440 tonnes. In 2020, the pandemic caused a collapse in jewellery sales but prompted stockpiling by investors seeking a safe place to store wealth.

       That reversed as economic growth recovered, boosting consumer spending and weakening investor appetite.

       Gold has fallen from record highs above US$2,000 (RM8,382) an ounce during the investment frenzy in 2020 to around US$1,800 (RM7,543) and most analysts expect prices to trend lower.

       “Investment (in gold) may struggle in 2022 amid competing forces,” the WGC said, pointing to rising interest rates which lift returns on assets like bonds that compete with gold, and high inflation, which could fuel demand for bullion as an inflation hedge.

       The WGC said it expected demand for jewellery, small bars and coins to remain strong in 2022 and for central banks “to continue buying gold but at a slower pace than in 2021.”

       In 2021, jewellery fabrication rose 67% from 2020 to 2,221 tonnes, the most since 2018, the WGC said.

       Fourth-quarter demand, at 713 tonnes, was the strongest since the second quarter of 2013. Purchases of bars and coins preferred by small investors rose 31% last year to an eight-year high of 1,180 tonnes.

       Central banks bought 463 tonnes of gold in 2021, up from 255 tonnes in 2020 but below the more than 600 tonnes bought in 2018 and 2019. Exchange traded funds shrank their holdings by 173 tonnes in 2021 after accumulating a record-breaking 874 tonnes in 2020. — Reuters