cryptocoin.com As we reported, gold prices traded at a one-week low on Wednesday and pulled back from two-month highs the day before. Prices later retreated below the psychological level of $1,800 at the time of writing today, after the US Federal Reserve said it would be appropriate to raise interest rates soon.
The EIU’s 2022 average estimate for gold prices is $1,761
Matthew Sherwood, global economist at the Economist Intelligence Unit, states that as expected, the Fed is “sending even stronger signals that it will start raising interest rates in March,” when it will also end its asset purchase program. In a statement the economist gave, he made the following assessment:
The news is bolstering gold in the short term as investors fear that the Fed will quantitatively die out and even accelerate rate hikes given current inflation trends.
This week, gold has drawn some safe-haven offers amid wild fluctuations in stock prices and geopolitical tensions in Europe, where there are fears of a Russian invasion of Ukraine. Ahead of the Fed announcement, Chintan Karnani, director of research at Insignia Consultants, commented:
Ukraine tensions will prevent any major selling in gold and gold prices in general will either rise or remain stable after the FOMC meeting due to escalating Ukraine tensions.
Matthew Sherwood says he expects the Ukraine-Russia crisis, along with market concerns about the impact of the Omicron variant, to keep gold prices high at current levels until the Fed enters a rate hike cycle:
We anticipate a very significant decline in gold prices in the second half of the year due to the waning effect of Covid-19 and the US interest rates continuing to rise, and we estimate the average for the whole of 2022 to be $1,761. Given geopolitical concerns and great uncertainty about how and when future Covid variants will emerge, there are significant risks to the outlook as gold prices remain volatile.
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