It’s been somewhat of a quiet month for gold prices in February as we await confirmation of when exactly the Federal Reserve will begin its rate cutting cycle. While this has left gold prices in a holding pattern, the fact that the expected loosening of policy appears to be pushed back could actually be great news for longer term pricing, according to industry experts.
WisdomTree’s Nitesh Shah, who serves as head of commodity and macroeconomic research, believes the Federal Reserve could be making a major mistake and its failure to act will benefit the bulls. “I think right now the market is assessing the economic situation probably a little better than the Fed as they focus too much on supply-side inflation issues. By pushing on the brake too hard for too long, they threaten the path of the economy.”
Shah isn’t a lone voice on this issue nor on his expectation that it will be good for gold prices long term. Being too slow to pick up on the real world impact of their policy path is a criticism that has been levelled at the Feds by a number of analysts and economists – with repeated warnings that it could push the economy into recession.
Shah expects inflation readings to be up and down in the medium and long term. He adds, “Every major economy you look at governments have growing debt, and this isn’t a problem with an easy solution, and that to me is creating long-term inflation. This just adds to the risk that central banks will make a policy mistake at some point.”
That said, Shah expects that interest rates will begin to fall this year and that will give the bulls a path to record highs. His predictions align with ANZ and place gold prices around a new high of £1,744 by Q4. There is no better time to act. Buy gold now.
