If overconfidence and risk apathy dominated investor sentiment in 2021, things are going to change this year, said fund manager Peter Grosskopf. According to him, the Fed is looking at a more hawkish monetary policy, and that would reduce liquidity in the financial markets. Even so, gold will remain as an attractive hedge against growing risks in equity markets.

And although Grosskopf does not expect stocks to turn bearish, it appears that the unprecedented gains over the past two years are slowing down. He added that a slowdown in stocks could also slow economic growth, which would force the Fed to take a less aggressive approach in its monetary policy.

Grosskopf noted that a particular risk for 2022 is that investors underestimate the impact of the Fed's monetary policy on market conditions. Reportedly, the US central bank is set to end bond purchases in March and raise rates at least four times this year. He mentioned that when the Fed began to reduce its balance sheet, the markets did not react positively.

Grosskopf said it is very unlikely that the Fed's actions will not provoke market correction, but on the bright side, that would create favorable conditions for gold. After all, inflation is still running very high, and it will not dip until late 2022.

That is why Grosskopf is firm that gold would hit record prices by the end of the year, up from the current quote, which is 11% below August 2020 highs.