Spot gold continued to fall slightly in early trading on Wednesday after falling sharply from nearly eight-month highs in the previous session. However, inflation fears are still accumulating as soaring energy prices spread to the wider market. That's what could trigger the next bull market in gold, according to Goehring & Rozencwajg Associates.
The supply tension in the oil market has intensified, and agricultural products and gold materials will be boosted.
The oil market looks increasingly nervous, which may be a sign that the prices of agricultural products and gold will rise to a higher level because of inflation fears.
Goering (Leigh Goehring), managing partner of Goehring & Rozencwajg Associates, said: "demand in the oil market is much higher than people think and supply will be much less than expected. In the fourth quarter of this year, we may face a situation where demand may far exceed supply capacity, as we have never encountered before. Even during the oil crisis of the 1970s, we never came close to global production capacity. However, we are very close now. "
Mr Goering added that already high oil prices could get worse as the fourth quarter approaches. He pointed to the seasonal trend in the market: "the reason for the supply gap in the fourth quarter is that global oil demand has a lot of seasonality on an annual basis. Global demand bottomed in May and June. It peaked in November and December. Global demand has exceeded 100 million barrels a day. By the end of the fourth quarter, traditional seasonal global demand is likely to exceed total global capacity. "
"Oil prices are likely to trade smoothly around $100 a barrel in the coming months and then soar to $150," Goering said. We should increase our inventory now, but we are still reducing it a lot. Demand is much stronger than expected. "
In addition, there is the risk of "black swan supply disruption", which could lead to a further surge in oil prices. Goering pointed out that this would put "tremendous pressure" on US inflation data.
The energy crisis will have a broader impact, and the agricultural market will be the first to be hit.
At a time when u.s. inflation has reached a 40-year high of 7.5%, such potential supply disruptions could cause inflation fears in the financial system. And that's what the Fed wants to avoid-inflation becomes too stubborn. A big surprise in 2022 could be that inflation could accelerate further as the impact of rising global prices extends to agriculture and agricultural supplies in 2022.
"the inflation rate in the United States this year is 9% Mur10%, which I think is far from over," Goering said. Rising food and gasoline prices have raised inflation concerns. We are now facing food inflation. Suppose the price of gasoline rises and the price of gasoline exceeds $5 a gallon. In this case, this may eventually lead to inflation panic, which will stimulate people to try to protect themselves from inflation on a long-term basis. This will stimulate demand for gold. " That's why Goehring & Rozencwajg predicts gold prices will reach $15000 over the next decade.
"We have always believed that inflation is not temporary," Mr Goering said. The situation will get worse because of the shortage we talked about before. The agricultural market will be one of the first commodities to feel the direct impact of rising oil prices. "
"We have seen a huge impact on the global fertilizer market," Goering said. The process of making nitrogen fertilizer is very energy-consuming. We have had a supply interruption. Goering added that physical shortages are beginning to emerge, including farmers having to plant less because of urea shortages. If the amount of nitrogen fertilizer is reduced, the crop yield will be affected immediately. This will seriously affect crops such as corn and wheat around the world.
Mr Goering added that the impact of the energy crisis and rising natural gas prices on fertiliser and global agricultural markets should be closely monitored throughout the year.
Institutions expect gold prices to hit bottom in summer, and autumn and winter is a good opportunity to enter.
Investors seeking safe-haven assets will be one of the main drivers of gold prices this year as global investors begin to feel the impact of inflation.
Goehring & Rozencwajg first believes that gold will weaken as the Fed begins its spring and summer rate-raising cycle. But this fall will mark the bottom of gold prices and provide a buying opportunity before the next rally.
Goering pointed out that the best time to invest in gold this year is autumn and winter. When the Fed starts to raise interest rates, there will be huge problems. When the Fed raised interest rates in 2018, it created a huge problem in the global repo market. They had to reverse all austerity policies. The same thing will happen this time. When they have to give up tightening interest rates because of problems they didn't expect in the financial system, that's when the gold bull market is going crazy. "
Goehring & Rozencwajg predicts that the bottom of gold prices could be as low as $1625 an ounce in 2022, which could be the intermediate withdrawal point of the last bull market that began in August 2018, when gold prices climbed from $1200 to more than $2000. Goehring added: "Gold is expected to fall back to $1650-$1625 when the Fed raises interest rates this summer, then hit bottom around that level and the bull market in gold will begin in the fourth quarter."
