Gold: Pessimistic perspectives

Gold rises amid pessimism over Fed rates and inflation Visitors: 48

At the beginning of this week, gold prices reached an all-time high. The increase in demand and therefore in price is partly due to the flow of capital from equities into gold. The pessimism towards the stock market is due to the fact that the markets do not expect the Federal Reserve to raise rates in the coming months.

The uncertainty pushes investors towards more reliable assets such as gold. Gold is known to provide an excellent opportunity for diversification. Also, the pessimism that has been observed in recent weeks about inflation and Fed rates has resulted in capital flows from the US to Europe.

There are also opinions that the Fed will not raise the key rate in the near future because it does not want to repeat the mistake made by the Fed in the early 1970s when it cut rates too early. It is believed that this decision was one of the causes of the so-called stagflation, a prolonged economic crisis exacerbated by high inflation.

At the same time, there is a lot of optimism about gold. The supply of this asset fluctuates insignificantly and does not increase following the increase in demand, which means that if demand increases, the price will increase with a delayed reaching of equilibrium. The supply does not increase because gold has a relatively stable price and its production is not reduced due to its fall and is in any case profitable, so all available gold deposits will be developed.

 

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Gold: Pessimistic perspectives

At the beginning of this week, gold prices reached an all-time high. The increase in demand and therefore in price is partly due to the flow of capital from equities into gold.

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