Gold prices continue to remain under pressure. However, its ability to hold on to critical support levels gives investors hope even as inflation remains stubbornly high. Chantelle Schieven, research manager at Capitalight Research, evaluates the current situation and explains her expectations for the gold price.
Will there be a change in the attitude of central banks?
While the US Federal Reserve remains hawkish, there are signs that the European Central Bank may be ready to shift to a more neutral stance on monetary policy and potentially adjust its inflation target rate, according to Chantelle Schieven. Schieven’s comments came ahead of the ECB’s monetary policy decision on Thursday. Expectations are that the ECB will leave interest rates at 4.75%. Many economists say it will be difficult for the ECB to continue raising rates as the region’s economy continues to slow.
cryptokoin.com As you follow from , at the Federal Reserve’s central bank symposium held in Jackson Hole, Wyoming last month, ECB President Christine Lagarde said the world may be seeing the beginning of a new economic era. Schieven does not expect the central bank to make any major policy announcements this week. However, he expects inflation to remain stubbornly high. That’s why the ECB may be preparing the ground for this, she says.
Central banks will have to make a decision!
Meanwhile, widespread supply constraints remain in commodity markets. This keeps food and basic commodity prices high. Chantelle Schieven wonders how inflation will fall in this environment. For this reason, she states that it is difficult to see a decrease in inflation. OPEC+ supply cuts continue to keep prices near recent highs. This makes the oil market the best example of this. Schieven explains his views on this issue as follows:
I don’t think we’ll see a major recession in the next quarter or two. But the global economy continues to weaken. At some point, central banks like the ECB and the Federal Reserve will have to choose between supporting their economies or keeping inflation under control. I don’t think they can do both.
This environment supports the gold price!
Chantelle Schieven also says it will be difficult for central banks to keep inflation under control as sovereign debt continues to rise alongside commodity prices rising. Expectations are that the US budget deficit will increase by $2 trillion this year. This means approximately doubling last year’s increase. Schieven says this environment supports the gold price as higher inflation will keep real bond yields and the US dollar in check. In this regard, Schieven said, “I do not think we have entered an era of hyperinflation. But headline inflation of over 3% or 4% over the next few years is not unreasonable,” she says.
Schieven is clear that the Fed is not ready to change its inflation target. However, he says investors should remember that there are no absolutes in the financial sector. Schieven points out that the Fed tried to convince markets that inflation was temporary for a year before beginning a record aggressive tightening cycle. He also notes that the labor market will be key to the Fed’s monetary policy. Meanwhile, although the U.S. labor market remains relatively resilient, there are signs of cooling.
When will the gold price really start to rise?
According to Schieven, gold investors will need to be patient as the market is neutral. However, Schieven says he still sees potential for gold prices to return to $2,000. In this context, Schieven makes the following statement:
Investors may have to wait until the second quarter of next year for gold to really take off. We have a price of almost $2,100 by the end of next year. We expect the Fed to reduce interest rates by the end of next year.
“ It doesn’t take much for gold prices to reach peaks!”
Chantelle Schieven draws attention to the resistance of the gold price last year. With that in mind, it wouldn’t take much to spark a rally to all-time highs, she says. Schieven expresses his expectation for gold prices as follows:
Given how strong the US dollar is and how high bond yields are, gold prices should have been $100 to $200 lower. The fact that the prices are not lower shows how much demand there is in the market.
