That means that gold is unlikely to return in the short term. For that to happen, the inflation picture would have to change, Patterson said. Gold is now retreating from its highs, but it could be forming a bullish flag pattern that could cause prices to rise much higher. In the same way, gold and interest rates also contribute to moving the price of gold, since lower interest rates, which usually occur when there are times of financial uncertainty and governments want people to spend, mean that saving is more difficult.
Since gold is also considered a very effective portfolio diversifier due to its low and negative correlation with major asset classes, it tends to rebound in times of uncertainty, so one of the factors to consider is the relationship between gold and other asset classes that feel pressure or pleasure in current financial circumstances. Moreover, as explained above, the value of gold is known to increase when the value of the dollar falls and the Federal Reserve has made it clear that it is willing to cause massive inflation and a devaluation of the dollar to stimulate spending and increase liquidity by printing money. This coincides with comments from others who have tracked gold for decades, as well as with the 8-fold increase in gold after the 1973-74 stagflation period. Gold is also a fairly unique asset compared to things like stocks and bonds, and that also causes it to act differently and the fact that it works as a hedge means that you have to look for factors that affect other assets differently.
This was known as the gold standard, but in 1971, the President of the United States, Richard Nixon, asked the Federal Reserve to stop respecting the value of the dollar in gold and to end its primary use as a monetary value and helped make the asset more of a store of value. Gold is starting to reappear as Bitcoin cools and the Delta COVID variety begins to shake the markets again. Expectations for a continued fall in gold prices are rising in light of the tendencies of central banks around the world to increase the interest rate. In addition, the fact that gold is a scarce asset, but with an uncertain supply, means that it is often worth watching the markets and forecasting gold prices for the next 10 years can often bring positive gains over this long period of time.
Interestingly, there are cases that can affect the price of gold in regional areas that are affected by factors such as weather. Gold and inflation also work together, since inflation is one way in which money can devalue quickly, and when this happens, people prefer to keep their money in something that increases in value rather than in something that increases in value, such as gold. As a result of the Federal Reserve's tightening of monetary policy by 300 basis points over the past seven months, interest rates on sovereign bonds and the U.S. dollar have risen to multi-year highs, posing an obstacle for gold.
Jeff Clark, senior analyst at GoldSilver, explains why it's never been a better time to own gold than now. Gold is a physical asset, so people can store and hold it, and its market moves differently from typical volatile markets, so it has a demand for people who protect themselves against uncertainty. Of course, gold is also used as a hedge in times of geopolitical uncertainty, since the asset provides more stable value when crises, such as war, are looming.