Antiques Roadshow: Golden dagger valuation shocks guest
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Christopher Vecchio, a senior strategist at DailyFX.com, claimed the gold market could be set for a further shock later this year when inflation begins to stabilise and markets respond to higher interest rates. Inflation in America currently stands at 7 percent.
However, the expert suggested inflation could dip back to around 3 percent by 2022, provided the economic consequences of COVID-19 recede.
Kitco puts the price of gold at $1,798.70 per ounce.
Mr Vecchio said: “I don’t necessarily have a lot of faith in gold’s move higher.
“Underlying fundamentals remain a significant concern.
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“We’ve seen the US Treasury yields, both nominally and in real terms, move significantly higher at the start of 2022.
“Historically speaking, gold prices tend to go down when real yields go up.
“And in an environment defined by tighter monetary policy over the course of this year, real yields will continue to move higher.”
He added: “I don’t see that gold has a legitimate path higher from here.
“The fiscal and monetary stimulus impulses are fading rapidly in the United States and in other Western economies.
“The UK, for example, has already embarked on austerity on the fiscal side.
“And the Bank of England is looking like they’re going to move forward with three or four hikes this year.
“Here in the United States, we see that it’s increasingly unlikely that the Democratic Congress is able to find consensus around a new fiscal stimulus plan, like the Build Back Better program.”
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However, Vecchio also warned there could be potential upside risk from new coronavirus strains, supply chain issues and geopolitical tensions, including those between Russia and Ukraine.
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