According to Wells Fargo, the gold bull market will not be stopped by Federal Reserve rate hikes that are expected to begin in March. Austin Pickle, Wells Fargo’s investment strategy analyst, shares his gold forecasts and explains why. we too cryptocoin.com present it to our readers.
Wells Fargo: Our end-of-year 2022 price target is $2,000 – $2,100
One of the bullish predictions for the precious metal this year comes from Wells Fargo, which forecasts gold trading at $2,100 by the end of the year. However, as many questioned just how successful gold could be in light of the Federal Reserve’s very hawkish monetary policy stance, Wells Fargo decided to go into detail. Analyst Austin Pickle comments:
Our gold price target for the end of 2022 is $2,000 – $2,100. One of the most common concerns we hear is whether a hawkish Fed that will raise interest rates in March will invalidate our positive gold outlook by raising rates in March.
There are several traditional arguments with reasonable assumptions that higher interest rates mean lower gold prices. Austin Pickle explains:
As short-term rates rise, other assets that can provide income streams to investors look more attractive than the zero-yielding yellow metal. Also, gold tends to be used as an inflation hedge and fights inflation as the Fed raises rates. These arguments suggest that higher federal funds rates could suppress gold.
Austin Pickle: Gold could shine in shadow of Fed rate hikes
However, history tells a different story, so Wells Fargo shared its analysis of gold’s price action during previous rate hike cycles going back to 1994. “Yellow metal typically bounces after the first Fed rate hikes,” said Austin Pickle.
Interestingly, after struggling in the months leading up to the first rate hike, gold tended to recover higher in the months that followed and even outperformed the S&P 500 Index. In other words, we believe that gold can still shine in the shadow of the Fed’s rate hikes.
Last month, the precious metal rose amid geopolitical tensions between Russia and Ukraine as more investors seek protection in uncertain times. At the time of this writing, gold prices were trading 3.22% at $1,968 daily, surpassing the peak of the last 9 months, with Russia’s invasion of Ukraine.
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