The era of free money is coming to an end this year as the Federal Reserve seeks to tighten monetary policy and shrink its balance sheet. According to a market strategist, investors want to hold something tangible in this environment and gold still remains important to investors.
“Investors should look to commodities to protect against market risk and inflation”
Risk and volatility have once again become a fixture in the market as the Federal Reserve seeks to tighten monetary policy and reduce liquidity, said Robert Minter, Director of ETF Investment Strategy at ABRDN, formerly Aberdeen Standard Investments.
Robert Minter adds that the tech industry and cryptocurrencies may struggle to attract investors’ capital in the current environment as they are seen as high risk. According to the strategist, investors should look to commodities that will protect against market risk and increased price pressures:
It’s time for investors to get rid of their ‘protons’ and buy something real (tangible) that you don’t want to leave at your feet.
“Gold remains an important tactical asset for investors”
Robert Minter states that his firm is optimistic about industrial metals as the industry sees broad-based supply and demand imbalances. He says metals like copper continue to see declining supply and rising demand as nations around the world rebuild collapsing infrastructure.
Another precious metal the investment firm is bullish on is palladium, as existing microchip supply issues wait to be resolved and automakers are ramping up production as they want to reinstate their dwindling supply. While the firm has been relatively neutral on gold this year, Robert Minter says it’s an important portfolio diversifier:
Gold was the most disappointing commodity last year. But it still remains an important tactical asset for investors.
Robert Minter: Gold lets you protect yourself against mistakes
The strategist notes that pressure from the Federal Reserve to address the threat of rising inflation remains the most important factor driving gold and silver prices through 2022. cryptocoin.com As we have reported, inflation in the USA reached 7.5% in January, reaching its highest level in 40 years. After this data, the probability of the Fed’s increase by 50 basis points in March increased, while the markets began to price the potential for six rate hikes throughout the year.
Robert Minter, who is positive for gold, says market expectations must change at some point. The strategist thinks the Federal Reserve will not risk slowing economic growth by over-tightening monetary policy:
The stock market, and to some extent the bond market, is priced in extremely aggressive moves that will eventually fade. The question is, how big of a hole will we dig before these aggressive moves are reversed?
The Fed is not only raising interest rates, it is also laying the groundwork for shrinking its balance sheet before the end of the year. Robert Minter states that he did not expect the central bank’s plan to deter gold investors that much:
As long as you have $28 trillion in federal debt and $9 trillion on the Fed’s balance sheet (a huge amount of money that will fall at some point), you need to protect yourself against mistakes, and gold does.
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