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(Kitco News) – The gold market continues to struggle in the dark, unable to sustain significant gains above $ 1,750 an ounce.
The gold market cannot even hold onto its gains after the second month of disappointing US labor market data. While the precious metal managed to briefly hit a two-week high, it was unable to break resistance at $ 1,780 an ounce.
The market is suffering as investors remain too focused on US monetary policy. Although September’s non-farm payrolls exceeded expectations, many economists have said that still won’t stop the Federal Reserve from cutting its monthly bond purchases by the end of the year. The Federal Reserve is in the process of changing its monetary policy, which will continue to weigh on gold prices.
Rising inflationary pressures have not even been able to help gold prices. We are witnessing a global energy crisis, pushing oil and gas prices to multi-year highs. As a result, some economists expect inflationary pressures to be much higher than expected by central banks.
Rising inflation does not support gold as it prompts market participants to integrate more aggressive actions from central banks. The CME FedWatch tool already shows that markets anticipate a low probability of a rate hike by June 2022.
But before all the gold investors start to throw in the towel and liquidate their assets, I want to stress that a lot can happen in the next 12 months or so. I think the markets are overestimating how aggressive the Fed and other central banks, like the European Central Bank, can be when it comes to tightening interest rates.
One report that caught our attention this week was that of Jefferies Investment Group. Despite all the weaknesses and short-term volatility, the investment company remains a long-term bull on gold. They said they see gold prices soar to $ 5,500 an ounce in the long run, as it becomes evident that it is easier for central banks to enter into unorthodox monetary policies than it is. ‘get out.
“The long-term vision here remains the same as it has been for many years. That is, the G7 central banks, including especially the Federal Reserve, will not be able to get out of politics. unconventional monetary policy in a benign manner and will ultimately remain committed to continued expansion of the central bank’s balance sheet in one form or another, ”analysts said in their research.
Bloomberg analysts also remain bullish on gold. In his October commodities report, Mike McGlone, senior commodities strategist at Bloomberg Intelligence, said he expects gold to return to its peak soon.
“It’s only been about a year since the last peak in gold, and we think it should be a relatively short matter of time to come back,” he said. “Gold has outperformed most major commodities over the past 20 years.”
It’s all for this week. To all of our readers in Canada, Happy Thanksgiving. And happy Columbus Day to our American fans.
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.
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