The gold market continues to struggle above $1,800. Still, the precious metal stays cheap as investors continue to miss the price risk in the market, according to a market analyst.
“The Falcon Fed has already triggered a landslide in financial markets”
Degussa chief economist Thorsten Polleit, in his latest market commentary, as investors raise the Fed’s interest rates in the US He states that gold is relatively cheap because it ignores the increased risk that it will push the economy into a recession. As we have covered in Cryptokoin.com news, according to CME FedWatch Tool, markets expect interest rates to be at least 3% by the end of the year. Thorsten Polleit says:
That doesn’t sound very good. However, the expectation that the Fed will end its excessively expanding policy has already triggered a landslide in the financial markets.
“Gold price can be prevented from rising sharply for now”
According to the economist, one of the reasons why gold has seen a significant selling pressure in the last four weeks One is that investors believe central banks can ‘soft landing’ the economy enough to weaken the economy enough to slow growing inflation pressures, but not enough to push it into recession. Thorsten Polleit comments:
As long as financial markets are reasonably confident that central banks can strike an acceptable balance between raising interest rates to reduce inflation and keeping the financial and economic system from falling over the abyss, gold prices will rise sharply for the time being. rise can be prevented. However, the risk that central banks will fail in their plans and cause a major crisis is real and cannot be neglected.
Master economist thinks there is still potential for gold
However, the economist says the US central bank is walking a very narrow path made difficult by massive worldwide government debt. he adds to his words. “The risk of something going wrong is huge, especially given record global debt,” says Thorsten Polleit. The veteran economist thinks that even if the Fed can avoid pushing the economy into a recession, there is still potential for gold when investors realize that inflation will stay higher than expected, and explains his views as follows:
In a possible scenario, central banks will raise interest rates a little more, but not to the point where it ‘crashes the system to reduce inflation’. This indicates that commodity price inflation will remain high for longer but may not spiral out of control. Real interest rates, ie nominal interest rates adjusted for inflation, will most likely remain in negative territory for years to come.
