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Gold prices are expected to average $US1900 ($2642) per ounce (oz) in 2022, as Fitch Solutions’ revised price from $US1700/oz reflecting the Russian invasion of Ukraine that has sparked an uptick in gold demand.

Gold prices are hovering near their all-time high of $US2075/oz and will be dictated largely by the war in the coming months.

Against a backdrop of elevated uncertainty around the impact of the ongoing conflict on commodity prices and amid continuing supply chain disruptions, market-based measures of inflation expectations hint at inflation higher for longer.

By the end of 2022 and early 2023, Fitch expects growth to be much closer to the pre-pandemic trend as economies will have recovered most of the output lost during the crisis.

However, some degree of uncertainty is predicted to persist as long as the pandemic still exists, therefore boosting gold.

The 2023 gold price forecast has also been revised from $1650/oz to $1800/oz.

In the longer term beyond 2022-2023, Fitch expects gold prices to remain on an easing track, which will reduce holdings of gold as risk-on sentiment returns.

Additionally, as most of the global population will be vaccinated against COVID-19 and countries move more firmly to a new normal beyond 2022, risk-on sentiment should also increase in tandem, reducing the appeal of gold.

Despite Fitch’s outlook for gold prices to weaken, the company does not see a return to pre-COVID-19 levels, with prices predicted to ease to $US1600/oz in 2026, compared to $US1393/oz in 2019.

Weak gold prices prior to 2019 drove gold miners to cut costs and improve efficiency in existing projects.