VanEck, an international asset management company, said in a research report a few days ago that although gold prices are still under great pressure in the short term against the backdrop of a strong US economic recovery, overheated inflation expectations in the future may become a catalyst for gold prices to rise. VanEck's medium-term target for gold is as high as $3000 an ounce.
Since November last year, with the positive news of novel coronavirus vaccine continues to spread, the market is expected to begin to recover. Since then, the price of gold has been disappointing.
However, gold prices rebounded steadily from nearly 10-month lows last week, with spot gold trading around $1734 in Asian time on Tuesday. "this could mean that it is starting to hit bottom," said Friedrich (Carsten Fritsch), an analyst at Commerzbank.
Foster (Joe Foster), VanEck gold strategy portfolio manager, said in a recent research report, "this (novel coronavirus vaccine) news, coupled with the US $1.9 trillion economic stimulus package, has created bright prospects for strong economic growth and market excitement." As long as this prospect continues, gold's role as a safe haven will continue to struggle, possibly throughout the first half of the year. "
Foster said he cut his short-term forecast for gold because of growing optimism about the US economy. "We have lowered our short-term gold forecast from" consolidation "to" pullback "and expect gold prices to trade above $1600, he said.
Inflation expectations may be the catalyst
But Foster said that while gold prices were likely to continue to struggle in the coming months, they expected catalysts to push gold higher in the second half of the year. He added that he remained bullish on gold for a long time, peaking at $3000 an ounce.
The most likely catalyst is overheated inflation expectations. Inflation expectations are now back to pre-pandemic levels, and some developments suggest that inflation expectations could spiral out of control. " He said.
Bart Melek, head of global strategy at TD Securities, said gold prices continued to be hijacked by the US Treasury market as the Fed's response to steeper interest rates would continue to lead to capital outflows from the gold market.
Treasury yields are now negatively correlated with gold prices: gold prices fall as Treasury yields rise. Daniel Pavilonis, a senior commodity broker at RJO Futures, said that this could change in the future, and once changed, gold prices could soar.
"eventually, this correlation will be broken. The Fed will admit that it is experiencing inflation and we may have to raise interest rates sooner than expected, which could break the correlation. Or [the Fed] simply acknowledges that rising yields are worrying, which is good news for gold. " Pavilonis said.
The Federal Open Market Committee ((FOMC)) will hold a policy meeting on March 16-17, local time, after which a policy statement and the latest economic forecasts will be issued. Investors need to be concerned about whether the Fed's view of the economic outlook has changed as a result of developments such as inflation.
