However, he stated that the ECB would start raising rates at some point, and the monetary policy gap would start to close. He added that monetary policy divergence between the Federal Reserve and other central banks like the Bank of Japan and the European Central Bank had pushed the U.S. dollar, which has been a significant headwind for gold, Shah said that he thinks it could be close to a peak. Overall, consumer prices rose 8.3% for the year, coming in hotter than expected.Īs for the U.S. At the same time, food prices have risen more than 9%. Labor Department said in its latest Consumer Price Index report that energy prices had risen more than 30% in the last 12 months. Shah estimates that Russia's war in Ukraine will keep energy and food prices elevated throughout the year.
Shah added that he expects the Federal Reserve to be as aggressive as possible to ensure that long-term inflation expectations remain well-anchored. "It will take years to get the infrastructure to improve the supply chain," he said. The only thing that will deal with supply-side issues, Shah said, is government infrastructure spending. The Fed's tools at hand aren't really suitable for the job of dealing with supply-side issues," he said. "Higher interest rates will tamp down demand inflation, but that is a secondary component of inflation. central bank will continue to raise interest rates throughout the year, Shah said that he questions whether or not it will bring down inflation. Gold is a 'good hiding place' for investors as S&P 500 falls nearly 16% this year - Franklin TempletonĪlthough the U.S. "I expect that we have reached peak hawkishness and that will be good for gold," he said. The central has signed that it could raise interest rates by 50-basis points at the next two meetings however, Federal Reserve Chair Jerome Powel pushed back on market expectations of a 75-basis point move. Shah added that he expects the Federal Reserve, aware of the risks of a policy mistake, to tread carefully. "It may not be a base-case scenario, but there are material risks of a recession." "Many smart investors are starting to wonder if central banks will throw the global economy into a recession to stamp out inflation," he said. He added that lower gold prices could attract renewed interest as investors worry that the Federal Reserve is on the cusp of making a policy mistake. He added that his updated forecasting models point to gold pushing to $2,300 by the first quarter of 2023.Īlthough gold has struggled in the last few weeks, Shah said that he doesn't see the potential for a major route in the marketplace. In a recent interview with Kitco News, Shah said that gold prices are still on a path back to $2,000 an ounce even as the Federal Reserve embarks on an aggressive tightening cycle. However, despite the recent weakness, the precious metal has held up in the face of strong headwinds, according to Nitesh Shah, head of commodities and macroeconomic research at WisdomTree. (Kitco News) - The gold market is trading relatively unchanged on the year after falling through critical support at $1,850 an ounce. Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions.
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