Gold has gained value over the course of 4 of the last 5 weeks


Gold continues to trade in a range, but over the past five weeks, gold prices have risen in value over the course of four of those weeks. Although gold traded lower yesterday and today, the week ended with a moderate increase of 0.6%. For the most part, we have seen the gold trade through the eyes of the weekly chart with a series of higher lows. What has been missing is a series of higher highs based on the highest achieved in June 2022, when gold peaked at $ 1920.

US stocks had mild to moderate gains, with both the Standard & Poor’s 500 and the NASDAQ index closing higher on the day. However, the Dow Jones industrial average closed down 0.56 percent.

For the most part, market participants and analysts have recognized a much more aggressive Federal Reserve with expectations of three or four rate hikes this year. The current assumption based on information released by the Federal Reserve is that each rate hike will be ¼%. This means that if they move forward with this more aggressive monetary policy, they will only raise the interest rate by 1% throughout the year, which would take the Fed fund rate from its current setting of zero to ¼%. This means that the Fed Funds interest rate by the end of 2022 will be set between 1% and 1%.

With recently released data on current inflationary pressures, the Bureau of Economic Statistics has confirmed what analysts and Americans have known for some time, and that is that inflationary pressures continue to spiral to higher levels with the CPI (consumer price index) now set at 7% in December year over year.

This brings us to the current dilemma facing the Federal Reserve. The more reserved or aggressive monetary policy of the Federal Reserve cannot limit the current increase in inflationary pressures to any great extent. Many analysts, including myself, recognize that the Federal Reserve’s monetary policy, as it appears with more hawkish behavior, can have no dramatic effect on the price of goods and services per se. Any real hope of seeing inflationary pressures subside must be achieved through a combination of actions by the administration as well as the monetary policy of the Federal Reserve.

As the data have clearly illustrated, the current level of inflation is based on the high accumulated demand during the first year and ½ of the recession, which essentially began in March 2020. As we approach the second anniversary of the beginning of the recession, which is a direct result of a global pandemic in many ways, we are much closer to understanding the new Covid-19 virus. However, that understanding has indicated that we are far from having any real grip on eradicating the virus. What is happening is that the virus has had a global impact as new waves created by mutations or variants of the original virus strain continue to wreak havoc on economies worldwide.

It seems that the question of what a new normal will look like at the end of the pandemic holds the real possibility that there will not be a conclusion or a time when the Covid-19 virus simply does not exist. Rather, it is beginning to seem likely that the health organizations and countries of global citizens will learn more effective measures to deal with the rapid spread of variants as they emerge.

This may mean that we are currently experiencing the new “normal”, and life as we know it from the pre-pandemic days will never completely return. As such, people will continue their daily lives with this problem and learn to adapt to it.

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Wish you, as always, good trade,

Disclaimer: The views expressed in this article are those of the author and may not reflect them Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. or the author guarantees such accuracy. This article is for informational purposes only. It is not a solicitation to make any exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article does not accept liability for losses and / or damages arising from the use of this publication.

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