With the Fed’s tightening cycle on everyone’s mind, where will gold prices be in five years? According to the analysis provided by MKS PAMP, there are two options for the precious metal to fall to $1,300 or rise to $4,000. But that depends on how fast or slow the Fed tightens.
“Look at what gold does in slow and fast Fed cycles!”
As we have mentioned in the news of Cryptokoin.com , gold prices started to decline with the falconry of the Fed. MKS PAMP looks at the yellow metal’s response to past Fed walking cycles to forecast where the gold price might be in 2027. MKS PAMP metal strategist Nicky Shiels comments:
Markets believe that a 50/50/50x walking profile (compared to 50/75/50x over the next few meetups) will actually rein in inflation, causing a recession. etc. While you continue to digest whether it’s enough for you, it’s worth taking a step back.
“Assess exactly what gold has done in past slow and fast Fed walking cycles,” Nicky Shiels said, adding whether the Fed is fast (as seen in 1980/1987/1994) or slow. He states that there is too much asymmetric risk due to the increase (2016/2004/1999/1977).
“Gold prices in slow cycle could be $4,000 in five years”
Strategist, slow walk cycle, smaller total number of increases in 1 year in 25bps increments and He describes it as a cycle with/or a relatively lower terminal funds rate, and says that in this cycle, gold could be $4,000 in five years:
A slow Fed walking cycle is pretty bullish gold (especially after 1 year). Gold doesn’t drop much once the Fed starts a slow march (max average drop -2%). On average, an increase of 115% over 5 years is equivalent to over $4,000 in gold in 2027 in today’s terms.
“Gold prices may drop to $1,300 in fast cycle”
Nicky Shiels, fast walking cycle, initial increase 50 basis points, defines it as a cycle in which total increases exceed 300 basis points in the first year, with increases between meetings and/or higher terminal funds rates. The strategist points out that a rapid rate hike cycle could trigger a steep decline in gold, with gold prices falling to $1,300 over five years:
A fast-moving Fed, with gold prices on a steady decline five years later with prices on average 32% lower. makes it trend. So this is equivalent to gold falling to $1,300, down $600 from current levels.
Nicky Shiels, who says that a fast Fed will also be bad for stocks, reminds that 1 year after fast walking cycles, SPX drops by about 10% on average. The strategist notes that for clues as to whether this cycle may be slow or fast, traders can look to market expectations around real rates.
Will the Fed tame or kill inflation?
Also, Nicky Shiels says the Fed’s choice between a slow or fast walking cycle will depend on the outcome the US central bank wants to achieve. “The Fed will simply have to choose to tame inflation (slow walking cycle) or kill inflation (fast Fed),” Strajejist explains.
Nicky Shiels states that in terms of gold’s short-term direction, investors are in ‘wealth conservation mode’ and says, “Don’t expect much trend in either case as it’s too early to draw any conclusions about the Fed’s pace.” .
“Gold prices would be well below $1,850 in a real bear market”
Strategist, nominal value of gold, bonds and stock bear market and real returns continue to rise, the longest series of losses since December, three weeks in a row is down. However, the strategist also underlines the following points:
However, the value of gold is declining. It gets even shallower, especially in the face of such massive repricing in returns. This is an early sign of being constructive. If this is truly a bear market then gold should be well below $1,850 and it is not.
