Precious Metals Outlook 2022

It is that time of year when we think about family and friends; when visions of sugar-plums dance in our heads. When what to our wondering eyes does appear, but this precious metals outlook, to help us steer clear. That’s the extent of the poetry on offer today, but let’s have a look at what’s coming our way. First, we will look back at last year’s projections and discuss target hits and misses and the implications for the 2022 outlook.

As usual, we win some and lose some when projecting future metals prices. Last year we projected that sometime during 2021, we would see platinum reach $1,300, palladium reach $2,800, gold trade in the $2,100 range, and silver reach a $30 spot price. Platinum did in fact reach $1,309+ on February 15, palladium reached $2,983+ on May 5, silver reached $29.05 on February 1, and gold topped out at $1,950+ on January 5. So we exceeded projections slightly on platinum and palladium, fell less than a dollar short on spot silver, and got close but no cigar on gold. With premiums for physical metal elevated for most of the year, the price for a Silver American Eagle 1 oz coin exceeded our projection by a couple of dollars. A Gold American Eagle 1 oz coin got close to our $2,300 projected cost, but not quite.

We all know where gold and silver are headed; the only question is how long they will take to get there. Market technicians such as Chris Vermeulen, armed with the latest technical analysis, tells us that gold should reach $2,700 in 2022, while silver should reach a spot price of $38. Chris discusses the technique he used to develop these projections on his blog post from December 9, using a technical analysis tool called “Fibonacci extension.” While I believe both metals will eventually exceed those numbers, my 2022 targets are less aggressive than that. Technical analysis is certainly helpful to help identify trends, but it does not fully account for the downward pressure sometimes exhibited by investment banks selling paper futures contracts. What is encouraging from the technical analysis is the general direction seen for the metals.

Over the past year, I have recommended those owning palladium to consider selling some for a profit. Prices have since dropped considerably from $2,983 to $1,780 in 2021, but we may see them drop to the $1,550 range before reaching $2,200-2,300 again sometime in 2022. Platinum continues to look like a long-range bargain at $941. We have discussed earlier platinum at one time being higher than gold in price and perhaps headed close to parity with gold over the next few years. While not catching up to gold in 2022, I do believe we could see platinum reach $1,400-$1,500 before this time next year. That would be a nice gain for platinum and offers a reason to consider adding some to your metals portfolio.

While the performance of gold in 2021 was somewhat disappointing, I believe the timeframe should be extended somewhat on earlier projections. The setup for 2022 seems incredible, and I believe we could see spot gold in the $2,200-2,300 range next year. I don’t believe that will be the long-range high, but I expect to see that level breached over the next year. Extrapolating the cost for physical metal would put American Gold Eagle ounces in the $2,400-$2,500 range. While not as aggressive as the technical projections mentioned earlier, it still represents a 20%+ potential for gold in 2022.

We could see spot silver reach $33-35 in 2022, representing a 47%+ increase from where silver sits today. At current premium levels for American Silver Eagle ounces, physical metal would be $45-$50 per ounce. Silver has every reason to reach this level and beyond as one of the world’s most underpriced assets available to invest in. When the price begins to take off, it often gets more difficult to secure the physical metal - so plan accordingly.

It might seem counterintuitive to believe we will see higher metals prices while the world moves towards further lockdown conditions. But physical metal represents stored value and the stored energy and labor needed to pull them out of the ground and refine them.  Nations worldwide, including our own, are making it more difficult for the mining industry to operate and pull precious metals out of the ground. With higher energy costs and environmental considerations moving to the forefront, it brings the future profitability of gold and silver miners into question. But these same considerations buttress the value of refined physical metal already above ground in private vaults. The investment demand for metal continues to grow, even as available supplies begin to be restricted again.

The other question that must be asked is, how do the metals compare to other investment opportunities going into 2022? Stock markets worldwide are near record levels, with company earnings being squeezed by record producer price inflation (PPI) difficult to pass on to consumers. Bonds are currently paying negative real interest rates, and not the safe haven once touted to be. Interest rates on traditional banking products ensure that savers will have less purchasing power next year for every dollar on deposit. And real estate is in bubble territory in many areas, with housing out of reach for increasing numbers of Americans in major cities nationwide. 

 Gold and silver are currently available at considerable discount to fair value and previous highs. A downturn in other sectors of the economy might also initially drag down gold and silver, but only temporarily. They both move in a channel relative to money creation, which has been running at record levels with no sign of slowing down. Christopher Rutherglen has documented this trend with some excellent graphic work displayed on his Twitter page, that implies gold is likely headed towards $7,500 over the next 4-5 years. This matches the commentary of others who have tracked gold for decades, as well as the 8-fold increase of gold seen after the stagflationary period of 1973-74. I believe we will see a portion of these gains manifest in 2022 and continue to be bullish on gold, silver, and platinum at current levels.