Worries about prolonged inflation support gold price
News Arnulf Hinkel, Financial Journalist – 28.10.2021
For months, investors have been fearing that the current high inflation rates will not return to a level below two per cent by the end of the year. This is the conclusion of a recent survey commissioned by the European bond ETF provider Tabula. It also shows that roughly 95 per cent of the surveyed asset managers and institutional investors from the UK, France, Germany, Italy and Switzerland fear a rise in inflation both stronger and longer than previously expected. Financial market experts increasingly share this opinion.
US Federal Reserve postpones planned interest rate hike
Fed Chairman Jerome Powell announced on 22 October that he expects inflation rates to remain high for a longer period than previously expected, until at least mid-2022. While it stood at 1.4 per cent in early 2021, the US inflation rate had risen to 5.4 per cent by the end of September. The Fed intends to raise the key interest rate only with an inflation rate decrease to 2 per cent or moderately higher alongside a maximum employment level. Analysts thus do not expect the Fed in the US and the ECB in the Eurozone to raise interest rates before the end of 2022.
Gold price forecasts range from US$1,700 to 3,000 per ounce
Potential gold price drivers such as inflation, the postponement of central bank measures, the still unresolved pandemic and supply bottlenecks for important components such as semiconductors are countered by price brakes such as optimistic economic expectations and the relatively high yields on long-term US bonds. Therefore, price forecasts for early 2022 vary wildly: while technical analysts of Citibank place the US dollar gold price per ounce at 1,700, expecting an increase to US$2,000 in the medium term, two former Canadian Goldcorp CEOs, David Garofalo and Rob McEwen, consider a price increase to up to US$3,000 possible. Visitors to the German precious metals website Gold.de most recently (as of 27 October 2021) expect a gold price of €1,761 (2043 US dollar) per ounce at the beginning of 2022.
