Volatility in gold is set to increase as market expectations sharply contrast with hints from the Federal Reserve about future monetary policy and interest rate trajectories. However, one market analyst said that investors could take advantage of the current situation to establish long-term positions.
Degussa Chief Economist Thorsten Polleit said the current price is suitable for investments up to five years, as despite not sustaining historical highs, gold's outlook is for $2,200 per ounce. After all, the discrepancy between market expectations and comments from Fed Chairman Jerome Powell creates some demand for gold as a safe-haven asset.
Edward Morse, Head of Global Commodity Strategy at Citi Research, also believes that gold prices will rise to $2,400 per ounce by the end of the year.
The Federal Reserve is likely to lower interest rates in the latter half of the year. However, mistrust in the central bank is growing, especially after First Republic became the latest regional bank in the US to collapse. Powell said that the banking system is reliable and stable, but many analysts believe that the Fed is downplaying the banking crisis at the expense of investors.
This uncertain economic situation will continue to push investors towards gold as there are very few safe-haven assets left. As such, gold and silver will continue to rise at the same time as the money supply increases further, interest rates decreases, and problems in the banking sector continue to affect the overall economy.
