Brien Lundin: Fed Powerless Against Inflation, Gold Will Win Eventually
Inflation has been a major theme throughout 2021, and as 2022 approaches investors are looking for guidance on what the new year will bring and how to prepare.
Speaking to the Investing News Network, Brien Lundin, editor of Gold Newsletter, said he doesn’t think the US Federal Reserve will be able to get a handle on inflation.
The central bank began tapering last month, and if it stays on schedule the process will conclude next summer. The Fed has said that at that point it will be able to look at raising interest rates.
When asked if this timeline sounds realistic, Lundin was skeptical. “It’s realistic that they could try; I don’t think it’s realistic that they can get too far down the road toward normalization,” he said.
In his opinion, the Fed will have to turn back at some point, whether it’s during tapering or when hiking rates.
“I don’t think they’re going to get very far if they start hiking rates, and as we’ve seen, the first rate hike is actually a point where it tends to mark a bottom in the gold price,” he explained. “The gold price tends to recover after the first rate hike, because … all the traders who were shorting gold in anticipation of the Fed hiking rates then kind of abandon that trade, and they release the selling pressure on the metal.”
Lundin also touched on Jerome Powell’s reappointment as Fed chair, saying that in his view it doesn’t really matter who’s in charge. “There’s no one there that is going to tank the US economy by raising rates to the extent where it’s going to have any kind of effect on the rate of inflation,” he noted.
While that’s not good news for everyday people, it should ultimately be positive for gold.
“I think eventually gold wins, because eventually the markets are going to realize that the Fed’s essentially powerless to defeat inflation, or even fight it in any significant way,” said Lundin.
Watch the interview above for more from Lundin on gold and the resource sector.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.