Tags: gold | bullion | metals | Federal Reserve

Analysts: Gold Set to Jump on Stable Oil, Fed's Money Printing

Analysts: Gold Set to Jump on Stable Oil, Fed's Money Printing

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By    |   Thursday, 29 September 2016 02:56 PM

Gold’s value will rise as central banks like the Federal Reserve keep trying to support economic growth with loose monetary policy, says Josh Crumb, a former Goldman Sachs metals expert who is chief strategy officer at Goldmoney Inc.

His investment firm developed estimates of bullion prices based on changes in interest rates and oil prices. Gold this year has risen about 25 percent to more than $1,300 an ounce, defying shortsighted forecasts that it would lose value as the Fed shrank the money supply.

“For gold to fall back below $1,100 again, the market would need a somewhat paradoxical environment of collapsing energy prices yet rising inflation, with the Fed hiking interest rates,” Crumb writes in a research paper. “Market expectations have already shifted away from ‘when’ rates normalize further to ‘if’ to some extent.”

The Fed in December raised interest rates for the first time in 10 years, and published estimates of four more hikes for 2016. But the central bank always found a reason to avoid increasing the cost of borrowing any further, including a slack job market, low inflation, weakening global economy, the U.K. vote to leave the European Union and the upcoming presidential election.

Investors give the Fed a 52 percent chance of raising rates by 0.25 percentage point at its December meeting.

“There are more market reassessments lurking to drive fiat currency (real rates) lower rather than higher,” Crumb says. “Anyone looking to preserve future wealth and purchasing power in a central-bank distorted ‘market’ should stop waiting for opportunistic entry points and start accumulating gold in a more consistent, stable and regular manner.”

Diego Parrilla, a managing director of Old Mutual Global Investors who also worked at Goldman Sachs previously, estimates that gold will likely reach a new record within five years as asset bubbles collapse and drive investors into safe havens.

He forecasts a “few thousand dollars of upside” as “monetary policy without limits,” including negative interest rates and direct asset purchases by central banks, debases the value of paper currency.

“As some of the excesses in other asset classes get unwound, gold will perform very strongly,” Parrilla told Bloomberg News. The “perfect storm scenario will mean that gold will perform best when other classes are doing worst.”

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Gold's value will rise as central banks like the Federal Reserve keep trying to support economic growth with loose monetary policy, says Josh Crumb, a former Goldman Sachs metals expert who is chief strategy officer at Goldmoney Inc.His investment firm developed estimates...
gold, bullion, metals, Federal Reserve
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2016-56-29
Thursday, 29 September 2016 02:56 PM
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