Page 27 - Bullion World Issue 11 March 2022_Neat

Bullion World | Issue 11 | March 2022

The best time to buy a
CombiBarTM was 10 years ago.

The second best time is now. Source: Metals Focus, Bloomberg
Historical performance of gold with inflation is not actually that strong or consistent over time. In the last 20 years, the rolling
correlation coefficient between gold in both real and actual, as well as inflation expectations have attempted to be statistically
insignificant. Metal Focus viewing fact, the link between Inflation and Gold particularly in recent times is indirect and mainly
through the impact of real rates and real yields. Real yields and real rates are after-all function of nominal rates and inflation.
That US policy rates will rise to control inflation have therefore capped in investors’ interest in gold.

Source: Bloomberg

If we look at the five and ten years back events, it is very clear that the market expects a return from lower to more
normal levels in the longer term, and this has both positive and negative implications for gold.

There are three take-home from all these discussions. First, the current market expectations of as many as six
hikes in 2022, seemed a little too aggressive to us. Second, once policy rates start increasing, liquidations do seem
inevitable, particularly as per that point inflation will also start to decline as some of the supply chain issues that
are currently hampering the economic activity and creating challenges will improve pushing real rates higher and
faster.

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