After spiking in early March, gold prices have retreated recently. Looking ahead, there are several factors that could potentially boost the price of gold. One is economic uncertainty. When uncertainty is high, as it is now, gold tends to perform well because it’s viewed as a defensive, ‘safe-haven’ asset. It’s worth noting that analysts at Goldman Sachs believe gold could hit $2,500 per ounce this year, as central bank and investor demand picks up on the back of geopolitical uncertainty.

Another factor that could drive gold higher is inflation. Gold is often viewed as a hedge against inflation as it has historically performed well when there have been concerns over high levels of inflation. In March, inflation in the US hit 8.5% – its highest level since 1981. Many economists expect inflation to remain high throughout 2022. This could have implications for gold prices.



However, rising interest rates could have a negative impact on the price of gold. Generally speaking, gold prices and interest rates have an inverse relationship, meaning that gold tends to fall when interest rates are rising. This is due to the fact that as rates rise, investors can pick up more interest on savings and bonds, and the opportunity cost of holding gold (which pays no interest) rises. The US Federal Reserve is expected to increase interest rates a number of times between now and the end of the year and currently, Fed funds futures are pricing in a year-end interest rate of 3.0%, which is equivalent to ten 0.25% interest rate increases from here.

Gold also tends to have a negative relationship with the US dollar. Recently, the US Dollar Index (DXY) has hit 20-year highs, putting pressure on gold. If the dollar continues to rise, gold could underperform.