In recent weeks, capital fled risky assets to seek haven in precious metals. Looking forward, questions remain around whether the 'stag' will fade at a faster pace than the 'flation'. In such scenario, gold price would suffer significant losses, according to economists at TD Securities.
Global central banks could ramp up their gold purchases following sanctions on Russia
“Consumer demand has also been resilient to higher prices, but is now showing signs of weakness as prices surge. Elsewhere, participants could also be expecting global central banks to ramp up their purchases following the West's aggressive sanctions on Russia, but official data have pointed to lackluster flows in recent months.”
“A more persistent inflation shock than growth shock could spark a substantial rise in expectations for future hikes, particularly as the probability of a recession is creeping higher in the midst of this broad-based commodity price shock. In this scenario, gold prices would present a substantial downside risk relative to current prices.”
