The gold market has been trading relatively unchanged for the year after falling below critical support. However, despite the recent weakness, the precious metal is holding back against strong headwinds, according to Nitesh Shah, head of commodities and macroeconomic research at WisdomTree.
“Low gold prices may attract attention again”
Gold prices are on track to return to $2,000 even as the Federal Reserve enters an aggressive tightening cycle, says Nitesh Shah. He adds that updated forecast models indicate that gold will rise to $2,300 by the first quarter of 2023.
Although gold has been in a difficult situation for the past few weeks, Nitesh Shah states that he does not see any significant route potential in the market. It also reminds us that lower gold prices could spark interest again, as investors worry the Federal Reserve is on the verge of making a policy mistake. The expert explains his views as follows:
Many smart investors are beginning to wonder if central banks will plunge the global economy into recession to stave off inflation. This may not be a baseline scenario, but there are significant risks to a recession.
“The Fed has reached the pinnacle of falconry, it’s good for bullion”
Nitesh Shah, aware of the risk of a policy error, He also states that he expects her to take careful steps. As you can follow on Cryptokoin.com news, the Fed gave the green light to increase interest rates by 50 basis points in the next two meetings, however, Fed Chairman Jerome Powel retracted market expectations for a 75 basis point move. The expert comments on the matter as follows:
We have reached the peak of falconry and I hope it will be good for gold. While the Fed will continue to raise rates throughout the year, it is unclear whether this will reduce inflation. Higher interest rates will suppress demand inflation, but this is a secondary component of inflation. Not the primary component. The Fed’s tools are not well suited for dealing with supply-side issues.
“We will see gold prices start to rise again”
Nitesh Shah adds that he expects the Fed to be as aggressive as possible to ensure long-term inflation expectations remain sound. As for the US dollar, which is a significant upside head for gold, Nitesh Shah says it could be near the top.
However, the expert states that the ECB will start to increase interest rates at some point and the monetary policy deficit will begin to close. At the same time, he notes that investor focus may return to the huge twin deficits of the US government, predicting
At some point, the trend in the US dollar will change and we will see gold prices start to rise again.
