The gold market is struggling as expectations for the beginning of the Federal Reserve’s easing cycle continue to retreat. But the longer the Fed waits, the greater the risk of a policy error, according to one market strategist. This would ultimately be positive for the precious metal.
That’s when the interest in gold will return!
cryptokoin.comAs you follow from , gold prices have had difficulty advancing since the beginning of the year. Nitesh Shah, head of commodity and macroeconomic research at WisdomTree, confirms this. But despite this, he notes that he is impressed by the relative strength of the market. It signals the final interest rate cuts by central banks, especially the Federal Reserve, this year. Therefore, the strategist expects investor interest to return to the market. In this context, Shah said, “This year, bonds will become more expensive as interest rates fall. “That’s when the interest in gold will return,” he says.
There is also a stronger bullish situation for gold!
Nitesh Shah predicts that gold prices will reach $2,210 in the fourth quarter of this year. Thus, he states that it will reach an all-time high. However, he notes that the Fed risks making a policy mistake. Therefore, he adds, there is a stronger bullish case for gold. In this regard, the strategist makes the following statement:
I think right now the market is probably assessing the economic situation a little bit better than the Fed. Because they focus too much on supply-side inflation issues. They threaten the course of the economy by hitting the brakes too hard for too long.
Gold is an attractive investment in the medium-long term!
Nitesh Shah says that in the medium and long-term outlook, inflation is likely to become relatively volatile. He adds that this is why gold is also attractive. He points out that due to China’s failing economy, the country could export deflation around the world. The strategist explains his views on this issue as follows:
China has produced a ton of solar panels and electric cars in the last few years, and they’re going to have to dump them somewhere to support their economy. We can expect a large number of cheap goods produced by China to be introduced into the global market, creating a deflationary effect.
Increases the risk that central banks will make policy mistakes at some point
Nitesh Shah also states that a recession in the USA would also be deflationary. This environment will give the Fed enough room to lower interest rates. However, Shah also points out that inflation remains a long-term threat as sovereign debt continues to rise and the globalization trend accelerates. Based on this, he comments as follows:
Government debt is increasing in every major economy you look at, and this is not a problem with an easy solution, and in my view this creates long-term inflation. This increases the risk of central banks making policy mistakes at some point.
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