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Financial Déjà Vu? Why Gold Could Repeat Its Historic Collapse of the 1980s
The minutes from the #FederalReserve (Fed) have sent a clear message: the fight against structural #Inflation in the U.S. is far from over. This scenario, marked by prolonged high interest rates, bears a striking resemblance to the crisis of the 1980s. Back then, restrictive monetary policy caused #Gold to enter a downward trend that drastically reduced its value for nearly two decades.
The conflict in the #MiddleEast and instability in the Strait of Hormuz act today as the main drivers of this pressure. As long as energy prices remain high due to geopolitical premiums, inflation will continue to force the regulator to maintain a strong #Dollar. Just like in the oil crises of the 70s, rising energy costs are the factor preventing the monetary easing that markets had hoped for.
The reaction of investors to the #FOMC has been decisive, halving the odds of a rate cut by the end of the year. This adjustment in expectations favors liquidity in currency over precious metals. Historically, when the opportunity cost of holding non-yielding assets (like metals) rises, #Investment shifts towards financial instruments with higher returns.
An additional risk factor is the behavior of #CentralBanks.
In the past, massive sales of gold reserves by institutions like the Bank of England flooded the market, sinking prices.
Currently, although many countries continue to accumulate reserves, a prolonged period of high rates and a dominant dollar could force some regulators to reallocate their assets, putting pressure on the supply of #PreciousMetals.
In conclusion, the future of the market depends on the resolution of tensions in the #EnergySector and the firmness of the Fed. $BTC
Financial Déjà Vu? Why Gold Could Repeat Its Historic Collapse of the 1980s
The minutes from the #FederalReserve (Fed) have sent a clear message: the fight against structural #Inflation in the U.S. is far from over. This scenario, marked by prolonged high interest rates, bears a striking resemblance to the crisis of the 1980s. Back then, restrictive monetary policy caused #Gold to enter a downward trend that drastically reduced its value for nearly two decades.
The conflict in the #MiddleEast and instability in the Strait of Hormuz act today as the main drivers of this pressure. As long as energy prices remain high due to geopolitical premiums, inflation will continue to force the regulator to maintain a strong #Dollar. Just like in the oil crises of the 70s, rising energy costs are the factor preventing the monetary easing that markets had hoped for.
The reaction of investors to the #FOMC has been decisive, halving the odds of a rate cut by the end of the year. This adjustment in expectations favors liquidity in currency over precious metals. Historically, when the opportunity cost of holding non-yielding assets (like metals) rises, #Investment shifts towards financial instruments with higher returns.
An additional risk factor is the behavior of #CentralBanks.
In the past, massive sales of gold reserves by institutions like the Bank of England flooded the market, sinking prices.
Currently, although many countries continue to accumulate reserves, a prolonged period of high rates and a dominant dollar could force some regulators to reallocate their assets, putting pressure on the supply of #PreciousMetals.
In conclusion, the future of the market depends on the resolution of tensions in the #EnergySector and the firmness of the Fed. $BTC