cryptocoin.com As we have reported, even as Russia’s invasion of Ukraine continues, the demand for a safe haven for gold has begun to dry up. However, the underlying ground remains in place, even as prices have dropped well below $2,000, according to a market strategist.
According to the strategist, the foundation of gold is solid
Tim Hayes, chief global investment strategist at Ned Davis Research, said in an interview that the time has come for the overweight gold position as volatility and uncertainty dominate the markets. The strategist adds that the conflict in Eastern Europe has created short-term safe-haven demand for gold. However, stating that geopolitical uncertainty will continue to increase inflation in the foreseeable future, Tim Hayes comments:
You want to keep your gold position between 10% and 15% until you enter an environment where interest rates will become more threatening. However, this is not the case yet.
The strategist’s comments come as the Federal Reserve tries to enter a new tightening cycle. Markets expect the US central bank to raise interest rates by 25 basis points seven times this year. Tim Hayes says gold could see some consolidation once the Federal Reserve starts raising interest rates.
“The biggest unknown, growing inflation threat for gold”
However, the strategist predicts that the Federal Reserve will not risk putting the economy in a recession by raising interest rates too aggressively, noting that it is walking a fine line with a slowing economy and rising inflation. In addition, Tim Hayes states that real interest rates will remain lower for the foreseeable future as the US central bank lags behind the inflation curve.
While the strategist remains bullish on gold and sees any correction as a buying opportunity, the biggest unknown is the threat of rising inflation. Tim Hayes says long-term prospects are sound, even as Russia’s war with Ukraine has wreaked havoc on commodity markets and boosted prices and inflation. Stating that short-term consumer prices may continue to rise, the strategist, on the other hand, does not see an environment where it got out of control like the 1970s and makes the following statement:
We are not there yet. If we were entering a 1970s-style wage-price spiral environment, you would see bond yields rise. This did not happen. I think we can see prices stabilize. It’s just a matter of time.
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