The start of the war in Ukraine caused the price of gold to rise above $2,000 per ounce. Therefore, the price performance of gold has been relatively turbulent this year. Recently, however, the value of the precious metal has begun to decline. According to the latest data, it lost 7.8 percent year-over-year. At the time of writing, the price of spot gold was hovering around $1,725. However, many analysts continue to make predictions about the direction and expected levels of gold prices. In this context, the latest forecast predicts a rise for the next 12 months.
“Gold goes to these levels”
Rich Checkan, CEO and Co-Founder of Assets Strategies International, evaluated the price of gold. Checkan’s assessment covered many factors such as the Fed, traditional stock markets. “People want to know why gold has not fulfilled its historic mission,” the analyst said. says. Then, “gold continues to fall in value. But at a much slower rate than other asset classes.” he states. As it is known, gold has lost 7.8% of its value annually. However, Bitcoin and traditional markets fell much more. The S&P 500, which is among the traditional stock markets, has lost 16.6 percent to date. Bitcoin, on the other hand, fell 51% in 2022, that is, in the same period. Described as digital gold, BTC was changing hands at $22,816 at the time of writing. The decline in asset prices was related to the tightening policies of the FED, the Ukraine war and the increase in inflation rates.
At this point, Checkan says we should look at the decisions of the FED for the gold price. According to him, the next step of the FED is critical to the value of gold. With the US CPI data coming in above expectations, there are two options on the FED’s table. These include a 75 basis point increase and a 100 basis point increase. Checkan says the FED’s next step has the potential to increase the value of gold over the next 12 months. As for the price level, the analyst gives an estimate of $ 2,400 in the next year.
What will the Fed do?
The US central bank, the Fed, is trying to combat rising inflation. In this context, it increased interest rates by more than 100 basis points as of February 2022. However, even the tight monetary policy of the FED was not enough to rein in the inflation. Data released in June 2022 revealed that inflation was at its highest level in 40 years. Accordingly, US inflation had not risen to 9.1% since 1981. Checkan said the Fed will reverse its tightening course once the economy begins to collapse. However, he also warned investors about what to expect before lowering rates. According to him, the Fed is more likely to raise interest rates by one or two before lowering them.
The record inflation for 2022 was compared to the high inflation of the late 1970s and early 1980s. In the 1980s, the Fed Chair raised rates to a peak of 20 percent. Historians say this brought inflation down from almost 14 percent to less than 2 percent. Today’s Fed Chairman Jerome Powell has been compared to the former chairman. Checkan claims that Powell lacked the former president’s “fortune”. “I don’t think Powell would risk a terrible recession,” the analyst said. He also said, “As a result, current inflation is much higher than the interest rates the former president started dealing with. I think Powell waited too long.” he added.
“This has to happen for gold”
As the Fed reversed course and cut rates, Checkan said the price of gold would rise even higher. He stated that inflation will remain permanently higher. cryptocoin.com As we have reported, gold is seen as a hedge against inflation risk. In other words, increasing inflation has the potential to cause gold to reach $2,400 within 12 months. In the ensuing bull market, he said, $3,500 could be the top for gold before the price turns to a new support level. “I think realistically we are looking at about $3,500 as the top of gold before we pull back and restart the cycle,” Checkan said.
