Stagflation, recession and inflation are all continuing to fuel the gold bulls, with the precious metal on track to finish the year over £1,596 ($2,000) according to fresh analysis. The latest publication of the In Gold We Trust Report warns against complacency in the face of recent price action, which has seen a window to buy opening.
The report authors say that global economies are facing a huge challenge as work begins to unwind pandemic-era monetary policy, at a time when the threat of recession and sky-high inflation remains ever-present. The analysts who penned the report said, “Just as in 2018, when we warned of the inevitable consequences of the attempted turning of the monetary tides, we are now issuing another explicit warning. In addition to wolfish inflation, a bearish recession now looms. The Federal Reserve runs the risk of overestimating the impact of rate hikes and balance sheet reductions on containing inflation, just as it has underestimated the impact of rate cuts on boosting inflation.
“As soon as the Federal Reserve is forced to deviate from its planned course, we expect the gold rally to continue and new all-time highs to be reached. We believe it is illusory that the Federal Reserve can deprive the market of the proverbial “punchbowl” for any length of time, and we seriously doubt that the transformation of doves into hawks will last.”
The report says that the overall down trend in the stock market means the Federal Reserve will be left with no choice but to act, which further favours record gold prices by the end of the year. The yellow metal is also on course to emerge stronger in the wake of the war in Ukraine, adding further impetus to a new bull run.
They added, “If the downward trend on the stock and bond markets that has persisted since the beginning of the year continues, a brash counter-reaction by the Federal Reserve seems to be only a matter of time. We think it is plausible that gold, as a neutral monetary reserve, will emerge as one of the beneficiaries of the troubling conflict between East and West. Gold will probably gain further acceptance as a reserve currency in many countries and increasingly establish itself as an anchor of confidence and purchasing power.”
