EDITOR'S NOTE: Contrary to the mainstream narrative that Russia’s invasion of Ukraine is a primary driver behind gold’s price rise, portfolio manager Alain Corbani argues that it’s global fundamentals and not geopolitical friction causing the massive inflows into the yellow metal. Though he admits that the Easter European conflict weighs heavily on global growth, he claims that its effect is secondary to the actions of central banks; that it will make them think “three times” about raising rates beyond a point that will drive the global economy toward “peak growth and peak inflation.” In short, we’re reaching the cliff toward a massive deceleration phase, and the market is making its collective opinion clear by converting assets to gold. The market believes that rates aren’t going to be raised high enough to cap inflation or spur economic growth. Gold’s bull response is clear. Corbani explains his rationale in the video below. Read them and decide for yourself whether you agree. If he’s right, the market may be facing a potential bloodbath in valuation. And unless you hold physical gold and silver, your wealth may be going down with it.
Source: Kitco News
Russian forces have launched an attack on the Ukrainian capital, Kiev, on Thursday. Spot gold is trading at $1,923.9 as of 12:30 pm ET, having rallied for all of February.
Alain Corbani, portfolio manager at Finance SA said that gold’s bull run was in response to heightened inflation expectations, not to the threat of armed conflict in Eastern Europe.
“I think the interest for gold has reflected the fundamentals, and the fundamentals are the markets understanding that rates wouldn’t move much higher,” Corbani told David Lin, anchor for Kitco News. “The market is already telling you that they don’t believe in more growth, that they didn’t believe in higher rates, and that we are facing peak growth and peak inflation.”
Russia’s recent actions against Ukraine will no doubt weigh on global growth, which would force the central banks around the world to think “three times” about raising interest rates, Corbani said.
“This war cannot create more growth,” he said. “The market has been telling us for several months that we are in a deceleration phase and this means that rates cannot go much higher. This is what the bond market is telling us and the equity market has gone sideways for several months,” he said.
On gold, Corbani said that because real interest rates are likely to stay in negative territory this year, macroeconomic forces are still positive for the metal.
For more information on how gold will perform this year and how inflation is about to peak, watch the video above.
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