After playing “second fiddle” to other assets for most of the year, gold prices are returning to 2020 record highs of over $2,000, according to DailyFX analyst Warren Venketas. In addition, the analyst thinks that the Fed will not raise interest rates until September or even December next year.
Warren Venketas: Very strong case for year-end gold rally
cryptocoin.com As you can see from the news, while the markets are preparing for the Federal Reserve’s December monetary policy meeting, where US inflation and employment data are at the forefront, there is a good rise in the gold price. Warren Venketas comments:
Inflation is a big thing for me. If we see inflation expectations outperforming the movement in interest rates, here’s what I’m looking for in this year-end rally. And it’s on the cards. I am very optimistic at this point.
Technically, he thinks gold is perfectly set for a bullish rally and a warmer-than-expected and more persistent inflation will help prices move higher. Warren Venketas explains his forecasts for gold prices and inflation as follows:
There is a very strong case for the year-end gold rally. The runoff effect of price increases will last until the second half of 2022. Inflation will remain for the next six months. Inflation is temporary but will last longer than originally anticipated.
Gold is likely to hit 2020 record highs of over $2,000 next year, as the precious metal catches up with other alternative assets. The analyst details this situation as follows:
That’s a possibility because we haven’t seen the typical gold behavior behind inflation. Gold plays second fiddle to many other commodities. It can catch. There are many fundamental factors. We’ve gone through even more upsides. The biggest competitor of the price performance of gold was Bitcoin. People are flocking to crypto as a potential inflation hedge, distracting from gold’s appeal. Also, gold’s safe-haven appeal is dissipating as COVID cases decline globally.
According to the analyst, the more persistent inflation, the more gold prices will recover.
DailyFX analyst expects gold to climb to $1,916 by the end of this year. So far, Federal Reserve Chairman Jerome Powell has succeeded in persuading markets that the central bank will be patient in raising interest rates, prioritizing achieving full employment over tackling high inflation. However, the analyst reminds that markets generally tend to overreact to data, and therefore, these rate hike expectations may rise again. Warren Venketas expresses his view this way:
Everything depends on data. Until the December meeting, inflation and employment figures will play a key role.
The Fed’s December meeting will also reveal the dot chart and the latest economic projections that will clarify the macroeconomic situation. The analyst states that the more persistent the inflation, the more gold will recover:
This means a bull market for gold. Because historically, we see gold tick higher when inflation is more persistent than in the short term.
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