January 27, 2022
Inflation, Tapering and the Macroeconomic Outlook
James Steel (Chief Precious Metals Analyst, HSBC Securities (USA) Inc), Rhona O’Connell (Head of Market Analysis, EMEA and Asia Regions, Stone X Financial Ltd), and Suki Cooper (Executive Director, Precious Metals Research, Standard Chartered).
In this week’s webinar, James Steel (Chief Precious Metals Analyst, HSBC Securities (USA) Inc), Rhona O’Connell (Head of Market Analysis, EMEA and Asia Regions, Stone X Financial Ltd), and Suki Cooper (Executive Director, Precious Metals Research, Standard Chartered) discussed how they see inflation, tapering and other factors affecting the global macroeconomic outlook.
The trio began by discussing the Federal Open Market Committee (FOMC), which met this week.
“The markets overreacted, as they almost invariably do,” said Rhona. “Gold was falling in anticipation of the statement and then dribbled gradually lower over the following trading hours. Rate hikes will always demand a market reaction, but what is most important is the cumulative level by which they are hiked.”
James agreed that the market had overreacted, and stated that it was interesting that we’d not seen much reaction from the institutional market, “illustrating the division between wall street and main street,” Jim said. “Gold is not a good inflation hedge – but it is a good portfolio diversifier, and a safe haven.”
“Rate hikes will start to temper the inflation spike we have seen,” said Suki. “We expect inflation to start to ease, especially in the second half of the year. The macro environment is shifting significantly.”
Suki finished with an outlook of the macroeconomy, highlighting how much the dollar has taken a back foot this year and how “we’re moving from a period where the dollar was a key driver to a period where the market is much more focused on different drivers.” She added that the dollar is expected to weaken throughout 2022 but it will remain positive.
“Gold may not be as sensitive to the dollar as it was last year, so real rates will still remain negative,” added James.
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