The increased demand for gold this year is due to the desire of investors to protect themselves from inflation. In March, the U.S. consumer price index stood at 8.5% - the highest since 1981. The prospects for gold for the rest of the year remain quite good - the price of precious metal will stay at $1,900 per ounce. This will be facilitated by high demand for jewelry, increased interest in gold-backed stock exchanges, increased purchases of yellow metal by central banks, a pandemic and geopolitical conflicts.
Bjorn Guzen, senior analyst at the American media holding S&P Global Market Intelligence, noted that the key factors in the growth of precious metal will remain Russia's special operation in Ukraine, high inflation, an increase in the incidence of coronavirus in the world, fears about a slowdown in economic growth. This year, global GDP growth is projected to be about 3.6%. Guzen believes the gold exchange rate will be around $1,900 an ounce in the short to medium term. Geopolitical and macroeconomic instability will lead to the fact that the gold rate will stay at this mark for quite a long time. Nevertheless, an increase in interest rates will be able to lower the quotes of precious metal. If central banks decide to raise rates, it would push gold prices down to $1,825 an ounce.
Gold exploration budgets increased 42% year-on-year to about $6.2 billion. Production financing reached a multi-year high in March, and production exceeded pre-pandemic levels. Budgets earmarked for gold mining are expected to increase in 2022. Total cash costs for precious metal production will rise by about 10% and exceed $900 due to rising prices for crude oil, energy and other raw materials. According to experts, in 2022 gold production will grow by about 5.8%. Australia will outstrip China to become the top producer of the yellow metal. Meanwhile, Russia is likely to remain the 3rd largest producer.