What does a Fed policy mistake mean for gold prices in 2022 [Video]

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What does a Fed policy mistake mean for gold prices in 2022? Recent moves by the FederalReserve have stoked fears of a major policy mistake that could alternately lead to a slowdown in economic growth combined with unstoppable inflation.

Last month, the Federal Reserve wrapped up its highly anticipated January meeting by signalling a March interest rate hike and suggesting a potential path of rate hikes that may be more aggressive than markets had expected.

Now that traders have digested the Fed's hawkish statement, it appears that the U.S central banks plan to fight inflation may not be as well thought out as it first seemed. This is starting to raise fears of “Stagflation” – a period of high inflation accompanied by a slowdown in economic growth.is at risk of doing “too much, too late”. The Fed’s characterization of inflation as transitory throughout the whole of 2021, is easily the worst inflation call in the history of the Federal Reserve.

Recent comments from Fed policymakers suggest the probability of at least four quarter-percentage-point rate hikes in 2022.But there's one big problem. Inflation is running at 7% right now, so a 1% hike is hardly going to make a dent. For traders, all of this means one thing: Gold prices this year will be driven by runaway inflation and the risk that the Fed is on the verge of making a major policy error.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:Trading has large potential rewards, but also large potential risk and may not be suitable for all investors. The value of your investments and income may go down as well as up. You should not speculate with capital that you cannot afford to lose. Ensure you fully understand the risks and seek independent advice if necessary.

 

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