In November, gold's price has risen by more than $ 100, but it has now entered a consolidation period.
Following the end of the current stage of the last rally on November 10, gold began to consolidate on November 11.
The rally began a day after the end of the Fed's November meeting. They announced that they would begin to reduce the accumulation of their assets in the amount of $120 billion at the end of the month and that the monthly reduction would be a total of $15 billion, and the reduction would continue until they reached zero. AAt the same time, it was pointed out in unison with the ECB and the Bank of England that the interest rates should remain extremely flexible.
The last case of massive accumulation of assets by the Fed was during the economic recovery after the recession of 2009, which was a direct result of the banking crisis in the United States. During the first quantitative easing, the net result of which was the Federal Reserve System with a balance sheet of about $4.5 trillion.
The Fed began to reduce its balance sheet around 2013 when it completed the reduction process. They reduced assets to $3.7 trillion. At that time, they believed that further reduction would have a negative impact on the economic recovery that had begun.
However, compared to the accumulation of their assets during the recession of 2009, the current quantitative easing strategy by the Fed has led to the fact that the asset balance has increased to $8.6 trillion, which is about twice the amount of their assets that they accumulated in 2009. At the current rate of a $15 billion monthly reduction, it will take at least until June 2022 before they complete this process.
Despite the fact that there is a lot of uncertainty about when the Federal Reserve will start raising rates, it can be assumed that it will most likely happen in 2022, but no later than 2023.
Over the previous week, gold opened and closed in a certain price range. The recent price increase of more than $100 was a direct reaction to rising inflationary pressures. However, the Fed has a direct lever to reduce inflation – it is raising the interest rate. Higher rates will lower the price of gold.
But while inflation is rising, investors have a prospect in gold.