The Gold Price Is Going To These Unbelievable Levels!

The gold market woke up after a disappointing year. While geopolitics was the first trigger that started the gold price surge, analysts say it’s much more than that now. Analysts state that gold is starting to shine again due to this mix of geopolitical and stagflation fears. Here is everything you need to know.

“Gold price is rising rapidly due to geopolitical conditions”

The precious metal is already up 9.4% year-on-year. A very strong return for gold, especially after closing 2021 with a 3.6% drop. cryptocoin.com As we have covered in the news, the geopolitical uncertainty regarding Ukraine and the new sanctions against Russia created a strong demand for gold. Investors see the precious metal as a hedge against risk, inflation and economic shock. Sukhi Jutla, co-founder and COO of MarketOrders, comments:

The gold price is currently rising rapidly mainly due to geopolitical conditions. With the growing economic instability caused by the war in Ukraine and Russia, investors are feeling nervous and are withdrawing from stocks where yields are falling and investing their money in traditional security instead.

The upward movement in gold began a few weeks before Russia invaded Ukraine. One of the primary triggers was a fresh outlook for inflation as markets began to doubt central banks’ ability to control skyrocketing inflation in light of key supply chain issues.

However, the rally really picked up speed as tensions escalated between Russia and Ukraine. In February, the precious metal crossed $1,800 and $1,900, hitting a new record high on March 8 at $2,078.80. Commerzbank analyst Daniel Briesemann says gold ETFs alone have seen 55 tons of entries since the start of the war in Ukraine.

Gold is in great demand as a safe-haven, as evidenced by the continued high inflows of ETFs. According to Bloomberg, entries totaled over 14 tons yesterday; Since the invasion of Ukraine by Russia, entries have totaled 55 tons.

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Bart Melek: After the geopolitical event, the risk premium of gold is rapidly depleting

However, even this $200 price action has many analysts reminding investors that geopolitical triggers are temporary drivers of gold and most of the gains will eventually be given up. Then, the war in Ukraine and heavy sanctions against Russia began to weigh on the global inflation and economic outlook and increase fears of stagflation. Bart Melek, head of global strategy at TD Securities, said in a statement:

We are being dragged into full-scale sanctions. Typically, gold’s risk premium quickly wears off after the geopolitical event. But in this case, even if the situation calms down, you will still have an inflation problem. And it doesn’t look like it will calm down anytime soon. You’re hopeful for peace, but based on what we’ve seen lately this seems highly unlikely. We’re going to make sure these supply shocks account for everything.

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Even Federal Reserve Chairman Jerome Powell admitted that he was watching carefully for the ‘unintended consequences’ of the conflict. According to Powell, the biggest concern has been high commodity prices. Noting that any long-term oil shock could cause inflation and slow economic growth, he added that the most important thing to watch is how permanent the increases in these commodity prices will be.

The solution to these problems, according to Matt Badiali, is gold.

The war in Ukraine has reminded investors around the world how tangible gold is, which has made it so attractive for thousands of years. Matt Badiali, Founder and CEO of Mangrove Investor, comments:

The world is reverting to the idea that gold is the money you want in a crisis. More than a decade of peace and bull exchanges has helped us forget this fact. The Russian invasion of Ukraine brought back the reality of life in crisis in real time.

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Matt Badiali said that this crisis has made investors ask questions like how useful digital money is when there is no internet, how to access bank accounts if funds are frozen, and how people can afford anything if their currency rapidly depreciates. Matt Badiali explains:

The solution to these problems is gold. In peace and prosperity, there is little urgent need for cash. We can value things like digital pictures. But they don’t matter when you’re hungry, cut off the electricity and the internet. If I can’t access the internet, I can’t pay you for the meal. But for a loaf of bread, I can give you a necklace or a ring.

Moreover, investors never forget the path of the Federal Reserve, which was considering aggressively raising interest rates before Russia’s invasion of Ukraine. Analyst Bart Melek expresses his views as follows:

Inflationary expectations rose everywhere. The Fed will be in a difficult position politically. If they get aggressive, does that really help with inflation? Not really. There is a supply shock. Higher interest rates will have an impact on inflation later. And there is already a negative supply shock, so it may not be wise to do so. And therefore, gold is rising.

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Incredible predictions for gold price

Matt Badiali stated that this rally created a new floor in the price of gold, adding that the precious metal will not fall below $ 1,600 in the next five to ten years. “My working hypothesis is that these lessons will result in a higher basis for the gold price going forward,” he says.

Sukhi Jutla states that gold will continue to make gains for most of this year and predicts that it could go up to $2,500.

Plus, Bloomberg Intelligence senior commodity strategist Mike McGlone says gold appears to be one of the biggest beneficiaries this year as Russia sanctions put significant upward price pressure on many commodities. The strategist explains:

Gold is poised to become the biggest beneficiary of the Russia-Ukraine war and commodities crippling demand. We see the metal as the leading potential endgame player of 2022, especially as commodities priced for supply shocks succumb to inevitable demand destruction.

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Some analysts do not even rule out that gold will approach $3,000 in this bullish cycle. Bart Melek states that the reason for this is that when gold is adjusted for the record high inflation in the 1980s, it will be $ 2,927. “Nominally, that was about $850 in 1980,” says the analyst, which when adjusted for inflation is $2,927. The analyst also makes the following assessment:

Another supportive driver going forward will be additional central bank gold purchases. Gold is seen as a real asset that no one can take away. I suspect there is too much buying by central banks. It turns out that Russia’s $600 billion foreign exchange reserves are useless as the central bank is sanctioned. The only thing that seems valid right now is physical gold. The experience is similar on an individual level as your accounts can be frozen. If they cut off your internet, you won’t be able to get your money. But no one has access to the physical material.

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Canadian investor Stan Bharti, who founded Forbes & Manhattan merchant bank, says gold is still at the beginning of its last bullish cycle, which started in 2020 and will likely last another eight or nine years. Referring to the current inflation cycle, Bharti predicts, “The price of gold will go much higher, $4,000-5,000 in this cycle.” Adding that in the shorter term, gold should reach $2,500 at the same time next year, Stan Bharti makes the following statement:

Inflation is coming back over time. Whenever inflation comes back, these metals will be more difficult to manufacture if currencies fall with all the geopolitical uncertainty.

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