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Gold's performance has been tumultuous this year, with the war in Ukraine sending the metal above $2,000 per ounce. Recently, however, gold has fallen in price, and is down year-to-date by 7.8 percent.
Spot gold is currently trading at $1,725.
Speaking with Michelle Makori, Editor-in-Chief and Lead Anchor at Kitco News, Rich Checkan, President and Co-Founder at Assets Strategies International, said, "people want to know why gold isn't doing its job. I submit it is… it's falling in value, but at a much slower rate than other asset classes."
The S&P 500 is down 16.6 percent year-to-date, and Bitcoin is down by 51 percent over the same period.
Checkan said that what the Federal Reserve does next could send gold soaring to $2,400 per ounce within the next 12 months.
He spoke with Makori at the FreedomFest 2022 conference in Las Vegas.
A Fed pivot?
The Federal Reserve has raised its key interest rate by more than 100 bps since February to combat inflation. The June 2022 inflation figure is 9.1 percent, the highest since 1981.
Checkan said that the Fed will reverse course on its tightening once the economy starts to crumble. He added that "we've got one or two more rate hikes [left] in the U.S.," before the Fed reduces rates.
The record inflation of 2022 has been compared to the late 1970s and early 1980s' high inflation. During the latter period, Chairman of the Fed Paul Volcker raised rates to a peak of 20 percent, which historians say brought inflation down from almost 14 percent to less than 2 percent.
Today's Fed Chairman, Jerome Powell, has been compared to Volcker, but Checkan said that Powell lacks Volcker's "fortitude."
"I don't think that [Powell] is willing to risk a horrible recession," said Checkan. "The bottom line is inflation is so much further away, at this point, from interest rates than what Volcker started dealing with. I think [Powell] waited too long."
Jim Rogers: A 'positive development' in Ukraine 'in the next few weeks' could cause a big rally, before a huge crash in stocks
Gold's price
As the Fed reverses course and reduces rates, Checkan said that gold's price will soar higher.
He suggested that inflation would remain permanently higher, and since gold is an inflation hedge, this would cause gold to reach $2,400 within 12 months.
In the ensuing bull market, he said that $3,500 could be a peak for gold, before the price returns to a new support level.
"I think, realistically, we're looking at about $3,500 as the peak for gold before we pull back and then start the cycle again," said Checkan.
To find out Checkan's long-term forecast for gold's price, and his further thoughts on monetary policy, watch the above video.
By Kitco News
For Kitco News
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