Fed Chairman Jerome Powell continues to downplay the threat of inflation. He said that despite recent talks, the central bank is not ready to change its current monetary policy.
Accordingly, gold investors are hesitant to fully return to the market.
Some accuse Powell of just saying what investors want to hear, so it is difficult to assess how temporary the looming inflation threat will be. But there is a huge chance that high prices will be more resilient than Fed members predict.
Last week, investors were focused on the consumer price index, which rose 5.4% year-on-year. Annual headline inflation also rose 7.3%, which is the largest increase since November 2010.
Because of this, more and more people are becoming aware of the new reality that the world is entering a new regime of inflation. In fact, even BlackRock, a large asset management company, is gaining momentum. Its CEO, Larry Fink, said the US should prepare for a period of higher inflation, as well as not exclude a stable rise in inflation above 3%. At the same time, 95% of BlackRock employees will receive an 8% pay increase.
In the long run, this situation is very positive for gold. If inflation rises, interest rates will also increase, which will push gold prices up.