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As a gold investor, if you expect a relatively quiet week to end easily, you are unfortunately wrong. Cryptocoin. com, the precious metal market also started Friday with optimism, gold and silver prices rose. Gold managed to climb to a six-week high above $1,800. However, this initial optimism was short-lived after Federal Reserve Chairman Jerome Powell stated that he cared about increasing inflation risks.

Fed Chairman Jerome Powell upset gold investors

Speaking at an online conference hosted by the South African Reserve Bank, Jerome Powell said the bank is on track to reduce its monthly bond purchases despite significant problems. On the threat of inflation, the Fed Chairman said he expects supply chain issues to be resolved eventually and inflation to drop to 2%, although risks escalate. Jerome Powell’s comments caused gold prices to drop nearly $30 from session highs. However, towards Friday’s close, gold traders managed to close the price positive at $1,792.28 to $1,800.

Contrary to what Jerome Powell says, markets see inflation as more than a “temporary bump.” Worldwide companies are facing an energy crisis, supply chain bottlenecks and labor market distress. Some sdollarser expect some of these problems to continue into 2022, meaning that inflation pressures that are already high won’t drop anytime soon.

Bank of America: Despite high inflation, current environment is still not good for precious metals

According to market analyst Neils Christensen, inflation expectations can be seen in the bond market as breakevens are starting to rise to multi-year highs. Five-year breakeven returns are at their highest since 2004. Many commodity analysts expect gold to regain its shine as the Fed lags behind the inflation curve.

However, not all analystsdollarser is convinced that higher inflation and lower growth, also called stagflation, will be positive for gold. In a recent report, Bank of America states that despite high inflation, the current environment is still not good for precious metals and reminds that not all stagflation periods are the same:

We measure stagflation using the ‘Misery Index’, which is a combination of inflation and unemployment rate. While misery triggered two gold bull markets between 1971 and 1981, the yellow gold prices and the ‘Misery Index’ diverged in recent months. In fact, the ‘Misery Index’ still remains below the 12.5% ​​level that has consistently pushed the yellow metal up in the past.

For now, we’ll have to wait and see who’s right: the Fed or the markets?


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