Gold prices closed the week before they could rise above $1,800. Gold has failed to hold on to the $1,800 it tested for the past three weeks. It seems that the threat of increasing inflation continues to dominate the gold market. It’s been a double-edged sword for the precious metal as inflation strains central banks. Especially for the Federal Reserve to take a more hawkish stance on interest rates. While these developments are taking place, we cryptocoin.com We follow famous analysts for gold comments.
Central banks seem pretty worried about inflation
The Federal Reserve is meeting next week, and there are growing expectations that they may start reducing their monthly bond purchases. At the same time, due to increasing inflation pressures, markets expect the US central bank to raise interest rates by June 2022.
After the Bank of Canada (BoC) announced that it was completely shutting down its bond-buying programs, we got a preview of what could be on the cards. In addition, the BoC forecasts a rate hike by the middle of next year, noting that inflation is a growing concern. In its monetary policy statement, the BoC addresses the following:
The main forces driving prices up (high energy prices and supply bottlenecks related to the pandemic) now appear stronger and more persistent than expected. The bank monitors inflation expectations and labor costs closely to ensure that temporary forces driving prices up are not buried in continued inflation.
Gold comments from Degussa Chief Economist
Gold, which is priced in Canadian dollars, lost about 1 percent after the announcement. And now it’s time for the main event. The expected change in US monetary policy kept prices below $1,800, marking a turning point around gold. However, although prices fail to rise, it still finds strong support above $1,750. Many analysts state that as inflation rises, government debt rises as well.
Degussa Chief Economist Thorsten Polleit says in a recent report that he expects tighter monetary policy to be “naturally cosmetic”, as the US economy cannot afford higher interest rates on its ballooning debt. The economist warns that any material increase in interest rates would be “equivalent to an earthquake for the global economic and financial system.” Thorsten Polleit adds that rising inflation continues to lower real interest rates, adding that this is a positive environment for gold. But for now, we’ll have to wait to see how the Fed performs.
“Persistent inflation pressures mean an environment in which gold tends to shine”
The precious metal is well-positioned for further gains, according to Rahul Paul, CEO of Radisson Mining Resources, when asked for comments on gold. Rahul Paul has this to say about the outlook for the gold sector:
The US inflation rate is the highest we’ve seen in 13 years. Typically, the Fed raises interest rates to keep inflation in check. But the US government debt stands at a record level of close to $29 trillion. This shows that it is much more difficult for the Fed to raise interest rates. Because an interest rate hike will have a very significant impact on the ability to pay off all these debts. This time, I can say that inflation pressures will be more permanent, and that means an environment where gold tends to shine.
Regarding M&A activities in the gold mining industry, Rahul Paul cites a number of notable transactions over the past year:
2021 has been a busy year for mergers and acquisitions. We have seen a number of transactions, many involving Canadian gold projects. Notable transactions this year include the purchase of Monarch by Yamana, QMX by Eldorado Gold, Battle North, Premier Gold by Evolution Mining. By Equinox and more recently Kirkland Gold by Agnico. I think this trend will only pick up forward.
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