Investors know that their pursuits come with a certain degree of risk. However, as we tiptoe into 2022, those vulnerabilities seem a little more pronounced than usual.
With the pandemic still ongoing and tensions rising, any type of financial liability might seem like too much. However, there are some markets that are performing well, and offer interesting returns to prospective investors.
This is especially the case if you’re curious about investing in precious metals. Today, we’re taking a closer look at how this market is performing and what you can expect from Q1 2022 and beyond.
Table of Contents
A Look Back at the 2021 Market
Before we dive into whether or not it’s smart to invest in precious metals in 2022, let’s take a look back. This market flew below the radar in 2021, with the prices of both gold and silver failing to reach their anticipated percentage increases over the course of the year.
However, looking at this performance through the lens of a 12-month analysis is short-sighted. The pandemic negatively affected sales across myriad industries, and this happened to be one of them. Instead, let’s review this market’s numbers from the past two years.
By December 29, 2021, the spot price of gold had risen nearly 19% over its close on December 31, 2019. Similarly, the spot price of silver rose nearly 30%, palladium increased 3.5% and platinum remained virtually the same. While there were other stock indices that out-performed those numbers during the specified timeline (especially NASDAQ), these was a solid outcome.
Looking Ahead to 2022 and Beyond
Though prices for precious metals dipped slightly in the final weeks of 2021, there are many reasons to believe that shift will see a turnaround in the coming weeks.
Of course, it’s always smart to go through a reputable resource before you dive in. We suggest partnering with an experienced player in the space, such as Patriot Gold Group. For an in-depth review of this company, check out raremetalblog.com/patriot-gold-group/.
Let’s take a look at a few of the reasons why it’s smart to buy precious metals in 2022.
Anticipated Decreases in Fiat Currency Values
The COVID-19 pandemic has affected finances on many different levels. However, though it continues to rage, the five major central banks in the world are reaching new highs. These institutions include the:
- S. Federal Reserve Bank
- Bank of Japan
- Bank of England
- European Central Bank
- People’s Bank of China
From right before the onset of the pandemic (February 2020) until now, these banks have amassed more than $12 trillion in assets. Their previous total of $20.4 trillion jumped to $32.5 trillion in fewer than two years.
What’s driving this increase? In short, it’s the result of significant levels of inflation applied to the global money supply. It doesn’t take an advanced degree in economics to see that prices are up almost everywhere you go. From the gas station to the grocery store, we’re feeling the effects of such inflation.
Over the course of this year, it’s expected that as inflation rates continue to rise, the value of fiat (monetary) currency will subsequently decrease. While this might mean a blow to your wallet, the good news is that historically, precious metals haven’t closely followed the inflation trends related to fiat currency. This makes it an attractive and secure market for those looking for a place to put their attention (and money) in the coming months.
Growing Consumer Interest
Due to their unlikelihood of getting caught in the wind of inflation, precious metals have long been considered safe havens for interested investors who want to avoid major long-term risks. This will continue to be the case in 2022.
While consumer prices might be skyrocketing at the present moment, don’t let this deter you from looking into the promising markets of gold, silver, and platinum. In fact, it helps to look at the numbers to more clearly understand how quickly your fiat money could decrease in value.
In 2021, the Consumer Price Index (CPI) grew by nearly 7%, with an 0.8% increase in November 2021 alone. This marked the largest 12-month CPI increase since the period ending in June 1982. Put simply, a dollar doesn’t go nearly as far as it once did.
As more and more people begin to realize the extent that inflation is impacting their general lifestyle, we can expect to see rising interest in the precious metals market.
A Potentially Shaky Housing Market
At the close of 2021, the housing market continued to be in a major upswing. In fact, many outlets predicted that rates would reach their highest numbers in 15 years, with around six million homes sold over the year.
How does this affect the precious metals outlook? While stocks thrive in periods of growth and optimism, the same doesn’t always hold true for this market. In fact, the prices of gold and silver rise during periods of perceived financial instability, as noted above.
Though 2021 was an impressive year for the housing sphere, many predict that the trend won’t continue far into 2022. Why? In some areas of the U.S., supply shortages are to blame.
When mortgage rates reached near-all-time lows in the early part of 2021, homebuyers jumped at the opportunity to put down a payment and own property of their own. As a result, there was a housing scarcity toward the end of the year. Today, inventory remains fairly low and competition is still high.
In response, rental rates are back up, and they’re expected to be even higher this year. Likewise, those low mortgage rates that were once perceived as too good to be true are trending upward, too.
In January 2022, they reached their highest point since 2022. The 30-year fixed mortgage rate rose by 13 basis points, reaching a new high of 3.4. As uncertainty continues to surround the real estate sector, we expect precious metals to remain solid and promising investments.
Decreased Motivation to Pursue Interest-Based Investments
Historically, interest-bearing investments have performed well, especially for long-term investors who are willing to wait the time it takes to receive a substantial payout from such pursuits.
A few of the most common examples include:
- Certificates of deposit (CDs)
- Money market funds
- Savings accounts
Though there may always be a place for these investments, their foundation is rocked when interest rates can’t keep pace with the rising CPI. As such, this may be the year that investors move away from those assets and pursue precious metals instead.
Instability of Cryptocurrency Market
It’s no secret that interest around the cryptocurrency sector grew throughout 2021. Spurred in large part by comments from celebrities and business owners such as Elon Musk, there continues to be buzz around Bitcoin, Ethereum, and other digital coins.
Still, it’s important to realize that cryptocurrency and fiat currency are similar in nature. The primary difference between the two is the lack of centralized authority for crypto users.
As some have risen in value over 2021, some early investors believe that they may soon be able to replace their primary form of currency by simply tapping their digital wallet. Even if this will one day be the case, we’re still not there yet. As more people shift away from traditional banks and into the online realm, this will make precious metals even more secure in 2022.
This year, we expect that most crypto investors will come to the realization that they can’t spend this form of money quite as easily or widely as fiat currency. When that happens, the gold and silver market should see an influx of interest.
The Continued Spread of the Omicron Variant
As the Omicron variant cases continue to rise around the world, investors are increasingly looking toward aforementioned “safe haven” investments that they can count on. This includes the precious metals market.
Though much is unstable and uncertain on a global scale, this market has performed well historically and remains largely untouched by many of the changes that are occurring at an everyday rate.
A Word of Caution on Silver
For years, silver has been a top-performing precious metal. Its longevity is due mostly to its prominent use in the industrial and automotive industries. A few of the top silver-containing products include:
- Solar panels
- Photographic components
As these demands have remained consistent, prices have stayed high. Yet, this might not be the case throughout 2022. China’s Purchasing Manager Index, or PMI, dropped somewhat in the second half of 2021, though it experienced a surprise peak in November.
Analysts attributed this decline to the rising price of raw materials, as well as ongoing supply chain issues and power rations. A similar trend occurred in Japan during the same general timeframe.
Both of these countries are among some of the top users of products that require and contain silver. If the global economy improves significantly during 2022, then silver needs may boom. However, if the trends continue and it remains shaky, then the opposite will hold true.
Investing in Precious Metals in 2022
The onset of a new year always brings with it plenty of expectations, as well as questions. We’re all feeling pandemic fatigue coupled with promising gains in some markets, and it’s natural to wonder whether an investment is smart.
While there are some risks associated with any type of financial venture, this year looks promising. Investing in precious metals could result in a great payout, especially if traditional fiat currency values stay the same or decrease.
Want to receive other business insights? We’ve got them all on our blog, so check back often for more informative guides.