Traders turn to both gold and stocks as the battle between the risk takers and the cautious takes root

14 January 2022 – The two top traded markets in the UK this week are a good proxy for what may well be a fight to win the battle for the hearts and minds of investors this year. The tech-focused NASDAQ 100 index and the gold price had two very different years in 2021. The NASDAQ was up 26% last year, while gold was uneventful and ended the year down just over 3%. The backdrop for 2022 is different - so far at least - with inflation still the main theme front and centre. 

This week’s US data showed inflation at its highest in 40 years and it remains to be seen whether that will temper investors' appetite for risk assets such as stocks and lead them to the safer haven of gold. Or perhaps markets have taken the view that this higher cost of living is just temporary and it is business as usual. Either way, it would not be surprising to see further volatility for both of these markets in the weeks ahead - or at least until investors find something else to worry about.

Perhaps the surprising market performance for 2022 so far is the price of oil. We are only two weeks into the year and already the crude price is up by 9%. Given concerns coming into this year about whether the pace of economic recovery was going to continue, some may have expected a more cautious start for the oil market. But it has got off to a flying start so far and has pushed within a couple of dollars a barrel of last year’s seven year high, set in October. It may be an interesting one to watch in the week ahead to see if, once again, traders start to get nervous ahead of these old highs and start to take some risk off the table.