Market veteran Ed Yardeni (Ed Yardeni) said that if inflation makes a comeback, the price of gold may continue to soar until the end of 2025.

The president of Yardeni Research predicts that by the end of next year, the price of gold may rise to 3,500 US dollars, or nearly 50% higher than the current level. This is because inflation is likely to repeat the mistakes of the 70s of the last century, when the price of gold soared from $35 per ounce to a peak of $665 per ounce as prices spiraled.

In a report to customers on Sunday, Adney stated: “The price of gold is reaching a new high. If rising oil prices lead to another spiral in wages and prices, this will be reminiscent of the “Great Inflation” period in the 1970s. Under these circumstances, $3,000-3,500 per ounce will be a realistic target for gold prices by 2025.”

The US Consumer Price Index (CPI) has cooled down sharply from a high of 9% or more in 2022. The CPI growth rate in February was 3.2% year over year. However, market commentators warned that supply chain disruptions due to geopolitical conflicts and a strong US labor market could cause inflation to return

With OPEC+ oil producers announcing that they will continue to cut production, the recent rise in crude oil prices has also intensified inflationary pressure. The price of Brent crude oil broke through $90 per barrel last week.

Adney predicts that if the Middle East conflict escalates, oil prices may rise above $100 per barrel. He estimated that there is a 20% chance that the inflation rate will reach a second peak, which will drive the price of gold higher.

Adney isn't the only predictor that the price of gold will rise in the next few years. Top economist Rosenberg said he expects the price of gold to rise 30% due to the risks posed by the Federal Reserve's imminent interest rate cut and the intensification of geopolitical conflicts.

Currently, given a series of data proving that the US economy continues to be strong, market confidence in the prospects for the Fed to cut interest rates has declined significantly.

According to data released by the London Stock Exchange (LSEG) on Monday, futures traders lowered their expectations of the Fed's interest rate cut this year to the lowest level since October last year. The federal funds futures contract reflects the expectation that the Federal Reserve will cut interest rates by about 60 basis points this year, while the forecast for the beginning of 2024 was to cut interest rates by about 150 basis points. According to the CME “Federal Reserve Watch”, the probability that the Fed will cut interest rates by 25 basis points for the first time in June is 49%, down from 57% a week ago.

Over the past few months, expectations about the extent and speed of interest rate cuts by the Federal Reserve have changed rapidly, and investors are increasingly skeptical that policymakers can cut interest rates without triggering a rebound in inflation. The Federal Reserve itself expects to cut interest rates by 75 basis points this year.

As a result, US Treasury yields, which are affected by interest rate expectations, rose. The 10-year benchmark US Treasury yield hit the highest level since November on Monday and once reached the 4.5% key mark. Some analysts see this as the main threshold for determining the yield to return to last year's high. Despite this, the traditional resistance of higher US Treasury yields has failed to stop gold from reaching another record high in the intraday market.

Under the influence of the dual factors of strong economic data and limited progress against inflation in the past few months, senior officials, including Powell, called for “patience” in cutting interest rates. Investors will keep a close eye on the March CPI announced on Wednesday to further assess the possibility of interest rate cuts this year.

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