The Federal Reserve aims to tighten monetary policy in 2022 and even accelerate the reduction of monthly bond purchases; but according to one market analyst, there is little they can do about the global supply cut that drives inflation. So how will the gold price be affected? Murenbeeld & Co. According to the expert, inflation will be permanent no matter what the Fed says or does. Details cryptocoin.com‘in. Regardless of analysts’ forecasts, each investor should make their own investment because analyst forecasts are not precise.
Gold price and FED decisions
Chantelle Schieven, head of research at Murenbeeld & Co., said in an interview that consumers should be prepared for higher inflation for the next few years as it will take time to repair the global supply chain. Analyst: “It may take four to five years to fully repair the damage done by the COVID pandemic to the global supply chain. “Companies will find clever and short-term fixes and other means, but this will increase costs.” Schieven said inflation could stay between 3% and 4% for the next few years, well above the US central bank’s target.
Global supply problems, rising wage inflation and continued government spending will continue to push price pressures further. Schieven said that even if the Federal Reserve wanted to get ahead of the inflation curve, it couldn’t. Schieven explained that the link between financial markets and the global economy will force the Federal Reserve to keep interest rates below inflation and keep real interest rates in negative territory. Analsit says:
Currently, according to our research, stocks are at fair value where interest rates are. But if you bump up the 10-year yield, then almost every industry, with some exceptions, jumps into overvalue territory. Now the Federal Reserve is more sensitive than ever to stock market fluctuations.
FED steps may not be enough
Schieven said that as the global economy continues to recover from the COVID-19 pandemic, the Federal Reserve will be wary of taking a wrong step in policy. He added that the last thing the central bank would want to do is raise interest rates too early and too aggressively, but that it would have to reverse course months later. “There is still a lot of uncertainty and I expect the Federal Reserve to be much more cautious as it tightens monetary policy, and that’s still a good environment for gold,” the analyst said.
Looking at gold prices, Schieven said they saw gold prices fall to $1,900 per ounce in early 2022 as the market created a new range in the growing inflation environment. However, he added that the bull market of gold is far from over: “We believe that before this gold bull market ends, we believe it will push out its inflation-adjusted highs of around $3,000 an ounce,” he said.
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