Inflation, GDP, and Gold market
According to the numbers that last night, FED published, they expect a 7% economic growth in 2021. 3.3 and 2.4, respectively also are the estimated GDP numbers for 2022 and 2023. The numbers are telling us that we are back on the standard growth path. On the other hand, inflation anyhow will stay above the FED target. Core PCE will be 3.0, 2.0, and 2,1 in 2021, 22 and 23 respectively. This is while the expected unemployment rate expects to ease from 4.5% in 2021 to 3,5% in 2023.
Put these numbers aside, and let`s see what is going on in stock markets. SP500, Dow, and Nasdaq all were heading forward into new records. And these advances are used to get support from the positive progress of vaccination in developed economies.
In Europe, economic data supporting vaccination progress tells us that the success stories can continue. ECB also, in its last meeting a week ago, emphasized that dovish policy will be there as long as the market needs that, and to confirm it, started the new round of selling ten-year bonds.
We are reading these numbers telling us that generally, we have a bright future ahead, and it is not the favor of Safe-Havens like Gold. But, on the other hand, there are few things to worry about.
Firstly, as we can see, the economy is growing, there are some signs of overheating and higher inflation still there. This is because central banks and governments injected lots of liquidities into the economies all around teh globe. If the central banks do not succeed in controlling this situation, higher prices and inflation can cause another crisis.
Second, is the debit increasing. These significant stimuli put much pressure on governments. Somewhere they have to stop it and find a way to recover their debts. The most important source of income is taxable. If they increase the tax rates, it can be damaging for stock markets and economic growth.
And finally, the collapse in the Stock market. Whether it is correct or not, many investors and people believe in the stock market bubble. This belief comes after seeing the new peaks one after another, while the economic recovery was not heading forward with the same speed of stock markets. If this fear grows more and more, psychologically can affect substantial short positions in global stock markets.
Summary
Giving all economic data and market sentiment, the downturn in the Gold market is not what we can see for a longer time. Therefore, Gold can be a good buy for the middle and long term. Technically also we can see the strong support at 1,700. Thus, the area between the current level and 1,700 seems to be a buying opportunity.
