Those looking to invest in gold understandably want a future gold prices prediction for the foreseeable investment period. The good news here is that as it currently stands, the value of gold is definitely on the rise.
Through this article, we take a look into the specific factors that play a part in the gold price trend with our gold price forecast.
After a decade-long bear market, the price of gold is beginning to rise. Its recent rally began during the pandemic crash of 2020. Since then, the price of gold has seen a steady rise. Because of this, many investors are wondering where the price of gold is set to go in the future.
To help you gain a better understanding of the future price of gold, we will be discussing both a five-year and ten-year forecast, which combined will help you see into the future of this valuable metal.
Fair warning, though; as with any other investment, there is always uncertainty when it comes to the future value of gold. This article is intended as a rough guide, not investment advice.
Factors affecting gold price
Because gold is such a mature and established market, there are a number of factors that come into play when determining its price and the price’s movement. Gold is also a rather unique asset compared to other intangible investments such as stocks and bonds, which also causes it to behave differently in the market.
All this, combined with the fact that it operates as a hedge investment, means that one needs to look for factors that impact each asset differently.
Gold is an asset that can help protect against volatility, which results in a higher demand for gold from those looking to guard themselves against uncertain circumstances. Due to the fact that gold is obviously a physical asset, it means it is able to be kept and stored safely and privately by those who choose to invest in it’s physical form.
The market of gold also moves differently from other typically volatile markets, which is mostly due to the large number of people hedging against uncertainty at a particular time.
Forecasting the price of gold over the next five years is a little easier than establishing a longer-term forecast. This is due to the fact that existing economic conditions provide us with a clearer idea as to which direction the price of gold will likely travel.
The following are three factors which play an integral role in gold price prediction for the next 5 to 10 years:
Inflation
Underlining gold's attraction as an asset for good times and bad; most investors will buy gold regardless of whether the domestic economy is growing or in recession. Gold and inflation also work together, as inflation is one way fiat currency can quickly devalue.
When this scenario occurs, many people would rather have their money secured in an asset that is likely to grow in value — an asset such as gold. Because of this, when inflation remains high over a more extended period, gold actually becomes a tool to hedge against inflationary conditions. This, in turn, pushes the gold price forecast higher throughout the inflationary period.
As of August 2022, the UK's inflation rate was about 8.6%. On top of this, inflation pressures are also co-occurring in other places around the world.
When there is inflation, the purchasing power of fiat currencies tends to decrease. This causes investors to try to park their wealth in more finite, tangible assets, such as real estate, art, and gold.
If this inflation is not transitory, then we could definitely see gold outperform these other assets over the next 5 to 10 years years.
Geopolitical uncertainty
Of course, gold is also used as a hedge in times of geopolitical uncertainty too, as the asset provides a more stable value when there are looming crises – including events such as war.
These geopolitical tensions add pressure on financial markets but assist in boosting both the demand for and value of gold. This, in turn, makes the prediction of future gold prices a bit easier to determine.
Perhaps the biggest wild card we’re currently experiencing is the war in Europe. In the past, wars in Europe have been known to escalate into World Wars, and if the Russian invasion of Ukraine persists, it could completely roil the stock markets. In the past, wars have proven to be very bullish for gold, and Europe’s current unstable state could have similar effects on gold in the future.
Global demand
Finally, we’re sure that you know that there is a finite, mined supply of gold, but what might come as a surprise is that most gold in circulation is recycled. This means that when the global demand rises, it is harder to meet supply.
This discrepancy between supply and demand heavily raises the asset's price and assists in determining a more accurate gold price projection. With the inability for more gold to suddenly flood the market, the relatively fixed supply acts as a solid point of reference.
Demand also has to do with the use of gold that has been removed from its market. The demand for gold keeps changing and has seen a significant boost in recent times.
This is, in part, a repercussion of electronics manufacturers deciding to incorporate gold into their goods for its conductivity. The inclusion of gold into their products is not something that electronics manufacturers have done at scale in the past, and it plays a significant role in both the global availability and general demand for gold.
Gold is also, of course, purchased as jewellery; the application of gold that we’re probably the most common with.
Finally, there is also a significant surge in demand for gold from global governments, seeking out gold as a store of value that they can keep locked away in their central banks. Although storing gold away like this may seem like an antiquated notion, if governments and big banks are doing it, it’s still some relevance.
The fact that gold is a finite resource also enhances its value, as well as its exclusivity. It cannot simply be printed in the same way money can, which adds to its merit as a stable investment.
5 to 10-year forecast
This leads us to our 5 to 10-year gold projection and the question we all want to know the answer to: will the price of gold go up?
Regardless of how you look at it, inflation is, unfortunately, going to be with us for the foreseeable future. The forecast of the price of gold in 2022 is based on the current economic environment, which consists of rising inflation, negative real yields, a weaker pound, and ongoing monetary dilution.
It's predicted that the price of gold will soar in the next five years if inflation takes hold and the economy underperforms expectations. This would be a much more “risk-off” outlook, an environment in which investors sell their riskier assets to seek protection in safe-haven assets.
What’s also worth considering here is the current political uncertainty which has resulted from the Russia-Ukraine war. If the conflict between Russia and Ukraine escalates, the price of gold could rise rapidly, as fear of geopolitical turmoil sends investors running to safe-haven assets.
With all this in mind, we could expect the price of gold to be higher in 2022, based on the following predictions:
- With inflation raging and the US debt piling up, gold could move from its current price to as high as $3,000 (approximately £2,500) per ounce throughout the next five years
- In the event that a massive market crash occurs, the price of gold could soar as high as $5,000 (approximately £4,150) per ounce in just five years
- Gold has seen a steady increase over the years, and the current circumstances could cause it to increase in value at an even higher rate
Although ten years is quite far into the future for a gold projection, gold’s past performances over the previous decades can offer us a bit of an insight as to where it is headed.
Throughout the last ten years, gold’s worth has increased by a massive 25%, with the largest portion of this increase occuring throughout the first year of the Covid-19 pandemic.
Although the past doesn’t completely guarantee gold’s future, the steady rise of gold’s value over the last four years in particular, partnered with the unpredictability of the current state of the world, would point to a further rise in gold’s value for years to come.
With all this in mind, now could be the right time to make your investment in gold. With the world in such an unpredictable shape that even big banks are turning to finite assets, there are a few solid indications that gold could have quite a bit of pulling power in the future.
And what better way to invest in gold than by purchasing 24-karat gold jewellery, enabling you to own a beautiful, pure gold piece that acts both as an attractive investment and stunning accessory?
