Inflationary pressure may force the ECB to act. The ECB held a flat rate statement and press conference on Thursday. The BoE and Fed have already taken action by raising rates or lowering the QE, but the main central bank behind the curve has also been the ECB. The effect of all this on gold and other details cryptocoin.com‘in.
The future of gold prices
“We are probably near the peak of inflation in the euro area,” said Villeroy of the ECB today. That’s hard to pinpoint, but the latest Markit PMI reports confirm that cost pressure has eased over the past month. Key in the studies here may be the omicron COVID-19 variant as it hit mainland Europe. But producing countries around the world did not report the same rapid increases seen in the UK, for example. ECB officials have now said they are seeing a new era of inflation with a target in sight. ECB’s Rehn seems to see a clearer picture, as he says inflation forecasts are subject to very high uncertainty. This was confirmed by comments from ECB’s Simkus, who said that inflation will be higher than expected in 2022.
This could mean a few things for gold. If central banks around the business start raising rates to combat inflation, this will offer another safe haven to shift some allowances. The problem with gold is that it is a non-yielding asset and bonds, for example, can see both capital gains and returns. Another scenario is that inflation is still very high in real terms and gold becomes a better investment than bonds as an inflation hedge. ECB’s Muller said the ECB may be ready to tighten faster if inflation stays above 2%. For clues, energy and soft commodity prices should be considered in the next few months. Leading rates against inflation in the coming year will give us important clues about the performance of precious metals markets. Because inflation is so high, real inflation rates will be more important than the rates set by central banks.
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