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Jerome Powell’s analogy of inflation with lumber, it shows Fed is just trying to convince business not to hoard. Higher inflation is going to be long term feature and can peak in 2021. Previous scenarios are not applicable here, higher inflation is blessing in disguise for new entrants to enter in market and to avoid stagnation.
As far as I understand a strong economy raise interest rates. When Reagan was in power through the 80's the US raised interest rates and gold went down. However this time interest rates are being raised through weakness and not strength. I believe the already grossly over printed money supply has risen a further 20% this year alone so raising interest rates will hardly have any effect on inflation. Here in the UK building materials are doubling in price due to several reasons.
Coming out of europe has affected timber prices
Sweden now sells to the US which has lowered its demand on canada
There's a shortage of goods due to the covid scenartio
People on covid leave are carrying out building and garden protects
finally a massive increase in the fictitious money supply so instead of £4 chasing a bag of mortar it's now £8 quid. God help those on extended mortgages scraping by on low fixed interest rates; when the borrowing rate goes up, When the property boom was underawy in the 70s 80's onwards You could at least get single or multiple tax relief via the MIRAS scheme. Where you montly interst payments were deducted from you gross salary before tax was calculated. Now there is no protection. This could easily finish up a property crash.
So al those negative things will drive gold upwards . Gold will be the only winner in a sea of pain
KRSS,
I think you might be right about 2023. Last time they the US tried to raise interest rates in 2018, Gold did well. It looks like they might try again in 2023. 2023 = 2018
KRSS IMO opinion bank of England is NOT willing to tolerate it up to 7%. The bank of England target is 2% CPI. I think there is ZERO chance of that happening. Quite simply we have borrowed billions to keep things moving during covid19, and that has to be paid back. The lower the rate then the less interest they need to pay. Inflation does not always correlate with interest rates, but is often shadows it.
Uk inflation above target, IMO BOE is ready to tolerate it upto 7% and across the pond Fed can tolerate it upto double digit. Gold peaked during last recession after 2-3 years, by that comparison it can peak in 2023
U