cryptocoin.com As you can follow from the news, the gold price has been stuck between $1,750 and $1,800 for a while. Today, however, it managed to climb above $1,800 amid concerns about the new Covid-19 variant, and was up 1.17% daily at the time of writing to $1,809. Meanwhile, Rob Haworth, senior investment strategist at US Bank Wealth Management, said in an interview that the global supply squeeze is the most important factor pushing inflation to levels not seen in 30 years. However, the strategist also states that these problems can be resolved as the global economy recovers from the Covid-19 pandemic.
“Rising bond yields will create headwinds for the gold price”
Senior investment strategist Rob Haworth also says there is still enough money in global financial markets to fix current supply constraints, even as the Federal Reserve cuts its monthly bond purchases and tries to tighten interest rates next year:
Looking at inflation, our baseline is correct: ‘This too shall pass’. There are incentives and profits for people to solve supply constraints.
However, while inflation will not remain at levels not seen since the early 1990s, Rob Haworth says he does not expect price pressures to drop to pre-pandemic levels. The Strategist also states that inflation for the foreseeable future is 3% on average, and that this is not enough to revive the current economic recovery:
There is a scenario where as long as businesses maintain their pricing power and consumers continue to spend, you will remain in a slightly higher inflation regime. However, this is manageable.
In US Bank’s base case scenario, Rob Haworth says bond yields could rise higher than their record lows, which would strengthen the US dollar and create headwinds for the gold price. Although the strategist says that his expectations are for moderate inflation, he also reminds that there is a lot of uncertainty in the market for precious metals, which may be upside.
Rob Haworth: Investors should look to diversify their portfolios
The strategist says that if supply chain cuts continue to push inflation pressures higher than he says, it will drive down consumer spending, stifle economic growth and create a stagflationary environment:
While stagflation is not our base case, the problem we have right now is that all these tail risks are not nonzero probabilities.
Rob Haworth thinks that because there is so much uncertainty, investors should look to diversify their portfolios and says the problem with gold is that investment demand is sluggish unless there is stagflation:
The challenge for gold is that you expect a price increase from fewer scenarios. So how much are you really investing in these tail risks? We do not have enough information to assess the situation as it is.
Finally, investment strategist Rob Haworth adds that they still prefer to invest in real assets such as large-cap stocks and real estate:
Historically, stocks continue to perform well in the environment we’ve seen, but you have to consider who has the pricing power.
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