Due to Russia’s invasion of Ukraine at the end of February, the gold market went over $2,000 per ounce in March for the first time since August 2020. Due to the instability in the world, investors are looking for a safe place to put their money as precious metals. 

But since central banks started raising interest rates, increasing the returns on interest-bearing assets as alternatives to gold, and making the US dollar stronger, gold prices have dropped. They are now stuck at around $1,800 per ounce (USD).

What do you think the future holds for the gold market? Given these different influences on the price of gold, is it a good idea to buy gold in 2022? This article looks at the different ways to invest in gold, the important factors in the market, and what some analysts think the price of gold will be in the future.

The Biggest Rally For Gold Since Its Peak In 2020 Has Ended

For most of 2021, the price of gold was lower than what economists had predicted. This was because many interest rate hikes were expected, easing worries about the economy’s recovery from the Covid-19 outbreak and high inflation.

Gold is frequently used as hedging against inflation because its value remains constant even while the value of fiat currency falls. But because investors in gold don’t get interest or dividends for holding it, its appeal goes down when interest rates go up.

The gold market is under pressure from the possibility of more rate hikes by central banks like the Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BoE).

Is gold still a good way to put your money to work? Because of what’s going on in Ukraine, there has been much more activity on the gold market. The price of an ounce went from $1,800 at the beginning of 2022 to $2,043.30 on March 8. This was the highest price for an ounce since August 2020, when it hit a record high of $2,070.

Stock and bond prices were falling worldwide, which drew the attention of investors looking for a hedge against increasing market volatility. According to the World Gold Council, the first quarter of 2022 saw the most gold exchange-traded funds (ETFs) since the third quarter of 2020, with a total of 269 tonnes, or $17 billion. At the same time, the US Mint has sold the most gold coins since 1999.

After spending most of last year trying to stay above $1,900, the price went back below it in the second quarter. In recent months, the dollar has been getting stronger. In May, the Dollar Index (DXY) hit a 20-year high, hurting the gold market.

A 0.75 percentage point (PPS) increase in the Federal Reserve’s benchmark interest rate took effect on May 15. Since 1994, there has been the largest increase in the number of people enrolled in the program. Currently, the rate is between 1.5 percent and 1.7 percent, the highest since the epidemic of Covid-19 began.

Is it smart to invest in gold?

Gold has been used to save money and pay for goods and services for thousands of years. Many investors choose to keep between 5 and 10% of the value of their portfolio in gold, either in the form of physical bars and coins or financial products like ETFs, to diversify their holdings and protect themselves against drops in the value of stocks and bonds.

Since the price of gold goes down when the price of the US dollar increases, gold can be used as a hedge against a drop in the value of the world’s reserve currency. Also, it tends to be a good investment during times of inflation and volatility caused by geopolitical unrest or other important events worldwide.

Even though other precious metals are also used to protect portfolios, the gold market is the most liquid, which is a good thing. This could make it easy for investors to turn their gold into cash anytime. Investors are finding it easier and easier to buy and invest gold online. Investors can leave their money to their heirs by buying real gold jewelry, coins, and bars instead of gold shares.