o3 BLOG | Investing
Q3 2022 Gold Outlook
Q3 2022 Gold Outlook and the Summer Stock Market Crash — Back in March, we wrote about the potential of a stock market crash in 2022 and how to prepare for one should one arise. While stock market fluctuations are typical, full-out crashes are few and far between. However, last month, the investors faced the worst-performing market in years, with experts predicting even lower lows in the months to come. While gold saw a decline during the first week of May, it offered an excellent buying opportunity for investors. Historically, when inflation and the threat of a market downtown looms, gold is the safe-haven hedge asset that can protect your portfolio.
As the stock market enters bear territory, Technical Analysts at the Bank of America believe that gold will see all-time highs this year, and we can expect to see month-over-month improvement while the stock market remains turbulent. With all things considered, including the strong performance of the American dollar, gold’s value continues to remain stable.
Q3 2022 Gold Trends
Investors believe gold is poised to hit $2k very soon. While it neared a bottom last month, when the precious metal breaks through at $2,000, its likelihood of going back down is very slim.
Primary Drivers of Gold in Q3 and Q4 2022
Supply, demand, and investment behaviour are the key drivers of gold prices. With economic uncertainty and the stock market downturn, investors are turning to gold to hedge their portfolios. The following will impact the price of gold during the second half of the year:
1. Demand and Supply
People are increasingly interested in investing in precious metals such as gold, particularly during times of uncertainty. With the world recovering from a pandemic and geopolitical conflict still looming, investors resort to gold stocks to diversify their portfolios.
2. Economic Policies
Interest rates and other financial policy decisions also have a critical effect on driving up gold prices. With lower opportunity costs, however, more investors will see gold as a safe haven for their money. On the flipside, investors are more likely to invest in the stock market if the opportunity cost is high. With the current health of the stock market, however, investors eye gold as their primary safe-haven asset.
3. Gold Jewellery Demand
Experts predict an increase in gold jewellery demand, aligning with economic recovery from the pandemic. Countries such as China and India typically see an increase in gold consumption after the summer, preparing for cultural festivities and wedding seasons.
4. Supply Chain and Scarcity
Due to supply chain concerns, global inflation, and rising energy prices, gold investment products profited from scarcity during the global crisis. Market experts say that the safe haven of gold bullion and stocks has driven gold prices up.
Summer Doldrums 2022
Inflation, fed hikes, and geopolitical unrest aside, the stock market tends to slow down in the summer months. Known as the “summer doldrums,” the lull in the market is mainly correlated to consumer vacations. This sluggishness is seen across all sectors and affects small to large businesses alike.
Historically, the market’s lacklustre performance due to the summer stock market doldrums occurs between May and September. Since 1926, stock market returns during this time are up to 45% lower than during the rest of the year. This 90-year span includes the 1929-1932 market crash, which marked the beginning of the 1930s Depression. Many investors are too familiar with the adage: “Sell in May and go away.”
Even when seasonal patterns appear prominent in historical records, they can reverse themselves depending on current events, such as a pandemic. Most seasoned investors understand that the doldrums are temporary — however, investing in defensive stocks such as the gold mining sector can offer the best protection against economic downturns or summer market lulls. While many sectors are vulnerable to the market’s ups and downs, gold trends in the opposite direction — and to meet gold demand, there needs to be a body that produces it — hence gold stocks being a wise investment decision.
Q3 Gold Outlook — Bottom line:
Despite political uncertainties and rate hikes, many experts believe gold will gather up the pace and set a new record high later this year. This view appears widespread as concerns about global interest rates and the anticipation surrounding rising oil prices. For many investors, the goal for this year is to accumulate high-quality junior gold mining stocks in order to capitalize on the next big breakthrough.
When investing in gold mining stocks, look for well-established companies with competent senior management teams and clear plans outlining how they intend to achieve their financial goals
To learn how O3 Mining can add long-term value to your portfolio, contact us today.
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