The US Federal Reserve (FED) is expected to become more hawkish. Markets are pricing in a 75 basis point increase at the next FOMC meeting, rather than a 50 basis point increase. So, how will gold prices move? Will there be record levels? Here are the analysts’ opinions…
Market recovery may take time
McEwen Mining Corp’s Chairman and Chief Owner Rob McEwen agrees with the market sentiment. However, he does not think that even with further rate hikes and quantitative tightening, the Fed will be able to rein in inflation by thwarting a Volcker-like approach. During the double-digit inflation period of the 1970s-80s; then Fed Chairman Paul Volcker lowered inflation by raising interest rates to 20 percent.
“The horse is already out of the barn,” McEwen said. He said the Fed has created a beast with its quantitative easing and low interest rates. He stated that it would take quite a while to tame this “beast”. McEwen said the expected rate hikes by the US Federal Reserve will “cool the real estate market even further”. “Speculative stocks and cryptos already reflect that,” he said. As we previously reported on Cryptokoin.com , currently the S&P 500 is down 22% year over year and the crypto industry has lost more than $1 trillion in value.
What will happen to the price of gold?
McEwen does not foresee a soft landing. “I think the Russians use the term ‘soft landing’ to have their astronauts crash to Earth on land, not water,” he explained. “We are heading in the direction of a harder landing… We will look at a major market correction in the next year or two,” he said. The price of gold has dropped 0.75 percent to date. While the precious metal hasn’t lost much in value compared to other assets such as stocks and cryptocurrencies, investors are wondering when the price of gold will rise.
In response, McEwen says, “It takes time for people to move from the belief that things are getting better and better, to the belief that ‘oh, maybe I need to protect something’.” He says that after that, gold will start to move. “I think we need to see more stress in the system. There are people who call and say that there is no other way,” he says. He added that he predicted $5,000 per ounce of gold in the next “two to three years” and said:
Look at Amazon, look at Shopify, look at many tech stocks. The value of [these stocks] exploded when the market suddenly decided to move in. Why shouldn’t gold, nickel and other metals do the same? It’s just a rotation of the market from one sector to another… it changes and becomes less optimistic. Then ‘How do I protect what I have?’ you ask. Gold has served this function for millennia.
