Experts Predict Gold Prices to Rise in 2022
The perception of gold as a safe haven has driven up demand for the precious metal throughout the financial turbulence of the COVID-19 era. According to a report from Financial News Media, Canadian mining companies Amex Exploration and Starr Peak Exploration have enjoyed high returns over the past 52 weeks, with gains of 120% and 300%, respectively. This reflects the fact that many investors have been turning to gold in search of protection against rising inflation rates, a weakened U.S. dollar, and uncertain economic times in general.
On top of these factors supply has also affected the price of gold. Canada in particular is close to reaching "peak" gold. This means that the country has extracted more gold than it has discovered. While this means that there will ultimately come a point at which production declines, the short-term implication is that gold prices are likely to rise. (Also, Starr Peak and Amex Exploration have identified new drill mining targets –– which may offset any eventual production drop-offs.)
Berkshire Hathaway’s Barrick Gold Purchase
Experts also attribute the rising gold prices in part to multinational holding company Berkshire Hathaway’s purchase of mining major Barrick Gold. Berkshire Hathaway, which is owned by investor Warren Buffet, acquired a 20.9-million-share stake valued at $564 million in August of 2020. Following the transaction, Barrick Gold’s stock rose by 12%, and overall interest in gold stocks appeared to spike as well.
Gold Stocks Remain Undervalued
The renewed interest in gold assets could create an upswing that combats the recent underperformance of stocks in the category. Mining.com’s report on mining stocks shows that gold stocks in particular have remained undervalued in comparison to actual gold, with big names like Barrick, Newmont, and AngloGold Ashanti all taking double-digit hits. The NYSE’s current ratio of gold to gold stocks is close to mirroring the historic lows of 2015. However, we may be close to a point at which investors seeking multi-year gains will start to accumulate gold assets such as stocks –– given the high growth potential of gold at present.
Growing Presence of Gold ETFs
There is a chance for other gold investments to rise as well. Most notably, this may be reflected in gold ETFs, which are tradable assets that contain bundles of assets designed to track the price movements of gold. As reported in Wealthsimple’s guide to top gold ETFs, there are by now numerous asses that fit into this category, from the established GLD (which invests primarily in physical gold) to the GLDM fund launched in 2018 (which holds 1/10 as much physical metal as GLD). Through any gold ETF however, investors can obtain a stake in the gold market without risking the bulk of their capital in underperforming gold stocks.
Further interest in mineral exploration
Outside of gold, Canadian government investment is also extending into new, economically viable mineral deposits. Ontario recently supplied funding of more than $690,000 to support mineral exploration at Lakehead University. The endeavor will involve analysis of nickel, copper, and platinum elements in order to accelerate future explorations. Additionally, the investment may eventually lead to the discovery of new mineral resources (or conceivably gold), which would improve Canada’s supply.
The steadiness of gold as an investment has made it a historically attractive option for risk-averse investors. Furthermore, the volatility of today’s financial landscape amidst the pandemic has created new demand. This creates an expectation of rising prices, and fresh opportunities for investment in gold stocks, ETFs, and even mining.