The gold market is once again at a striking distance of $1,800. According to market analyst Neils Christensen, the new momentum could push it higher as markets can readjust their expectations for potential interest rate hikes from the Federal Reserve.
“Fed said nothing that could prevent gold from rising above $1,800 again”
George Milling Stanley, chief gold strategist at State Street Global Advisors, says that since June, investors and markets have been very aggressive about price amid potential rate hikes. The Strategist comments:
Federal Reserve Chairman Jerome Powell made it very clear Wednesday that there is absolutely no link between shrinking the balance sheet and possible rate hikes.
cryptocoin.com As you can follow in the news, on Wednesday, the Federal Reserve started to reduce its monthly bond purchases as expected and the central bank expects the tapering process to be completed by mid-2022. However, following the monetary policy decision, Jerome Powell stressed that the committee is not looking at rate hikes anytime soon. In his speech at a conference following the Fed’s interest rate announcement, Jerome Powell underlined the following:
The policy is in a good position to appeal to reasonable conclusions. It will be too early to raise interest rates today. We would like to see the labor market improve further.
According to analyst Neils Christensen, although the Fed Chairman said he is in no hurry to raise interest rates, markets continue to price the rate hike until June next year. But George Milling Stanley says he expects these forecasts to change in the new year, which should continue to support gold prices:
There is absolutely nothing the Fed has said to prevent gold from rising above $1,800 again. The market will now have to readjust its expectations, after what Jerome Powell said. I can’t wait to see what the market decides to do.
Gold is more attractive to hedge against inflation risk, according to strategist
In addition to shifting interest rate expectations, George Milling Stanley says he expects gold to attract more investor interest as equity markets continue to rise to record highs after record highs:
Equity markets were in a high risk mood for essentially all of 2021. The market far outstripped the real economy. The stock prices don’t reflect the fact that there are rental signs everywhere you look.
The strategist states that he does not expect to see a major correction in the stock markets, however, a small downtrend will be enough to bring gold’s role in the portfolio back to the fore. George Milling Stanley adds that gold is currently more attractive as a hedge as a hedge against inflation risk.
Although rising inflationary pressures are positive for gold prices, George Milling Stanley states that the outlook is still uncertain and explains that during the last significant inflationary period of the 1970s, inflation rose for several years. Strategist also states that gold prices increased by 16% in this period and makes the following assessment:
For gold to return to 15% or 16% a year, primarily as a result of hyperinflation, I think it would take more than four months for inflation to clearly above this level.
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