At the end of 2021, gold prices fell by 4% year-over-year, showing the biggest decline in 6 years. However, the asset could slump further in 2022, JP Morgan analysts predict.

Gold was on the upside on Thursday, gaining 0.5% or $8.30 and reaching $1,814.10 per ounce.

The asset advanced despite rising dollar and the rally at the US stock market. On December 30, USDX went up by 0.2% to 96.15 on positive US unemployment claims data. The amount of initial and continuing jobless claims decreased last week.

Wall Street was encouraged by easing concerns over Omicron's impact on the global economy. The Dow Jones Industrial Average and the S&P 500 pushed intraday highs during the session. However, the indexes closed in negative territory, which gave support to gold.

The asset was also boosted by falling yield of US treasury bonds - the yield of 10-year bonds suddenly slumped on Thursday. This allowed gold to pare the losses it had sustained earlier and regain the key level of $1,800, which was lost early on Thursday.

With the New Year looming, bullish traders come into play on the market. Holding onto the key level of $1,800 remains the main objective for investors. Gold broke above $1,800 last week. It has tested the key level unsuccessfully several times since November.

J.P. Morgan's 2022 outlook for gold

Despite the gains made in the final week of the year, gold lost ground over the past 12 months, falling by 4% to the lowest level since 2015. It could continue to move downwards in the next year.

J.P. Morgan's commodity analysts see the asset fall further, being unable to resist the Fed's monetary tightening in 2022.

At its December meeting, the Federal Reserve stated it intends to fully wind down asset purchases by March and raise the interest rate three times in 2022.

J.P. Morgan sees the Fed hike the rates in September 2022. Rising US Treasury bond yields would put pressure on gold throughout the year. The yield of the benchmark 10-year note is forecasted to reach 2% in mid-2022 and 2.25% at the end of the year.

The bank's analysts see the US dollar increase by 1.6%, boosted by the growth of the US economy, which is expected to rise by 3.8%. These factors are likely to push the asset down.

J.P. Morgan's outlook is bearish on gold. The precious metal is forecasted to fall to about $1,520 in the first quarter of 2022 and slide to the pre-pandemic level of $1,520 at the end of the year.