Gold investors should expect to see a more nuanced market as the Federal Reserve tries to tighten monetary policy through 2022, according to the latest research from the World Gold Council. cryptocoin.com We are presenting the details in the report of the gold foundation…
WGC: Fed boosts gold price potential
In a report released on Thursday, WGC said that while the precious metal has faced some tough factors this year, it still has solid support. Gold prices dropped nearly 4 percent in 2021, disappointing many investors. Analysts noted that despite record low real interest rates, the gold market was strained as investors focused on the Fed’s monetary policy. However, WGC focused on one important detail, saying that the potential of gold is increasing as the first rate hike of the US central bank approaches. Analysts used the following statements:
Gold historically underperformed in the months leading up to the Fed’s cycle of tightening its monetary policy, but outperformed significantly in the months following the first rate hike. US stocks showed their strongest performance before the tightening cycle, but provided softer returns afterward.
Currently, markets expect the Fed to raise interest rates four times this year. There are growing expectations that the central bank may shrink its balance sheet later this year. While the precious metal will remain sensitive to rate hikes, the WGC noted that investors should focus on the bigger picture as rising inflation will keep real interest rates in low to negative territory. It was noted that the price of gold increased by an average of 14 percent in years when inflation was above 3 percent. The recovery in physical jewelery demand and renewed purchases by central banks will also continue to support prices through 2022, WGC said.
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