Most everyone has bought into the "taper" narrative, and paper gold futures have been below their 200 day moving average for over a year. However, at some point the market will realize the taper in 2022 is really more QE.
The Fed will buy $120 billion in securities in November 2021. In the $15 billion a month "taper" between December 2021 and July 2022 they will buy approximately $420 billion in securities. That is a total of $660 billion in "taper". The QE4 taper is really QE5. Many skeptics even question that the Fed can stay its course of taper with a 2022 budget deficit of $1.8 trillion. The treasury will need to sell $150 billion in treasuries a month. Many believe the Fed will need to monetize the debt to keep interest rates low, or run the risk of a stock market meltdown. Raising interest rates twenty five basis points in 2023 is like saying the "check is in the mail". The Fed does not know what it will do in a few months, let alone a year from now. Some believe Powell will be replaced in 2022. An increase in Fed Funds of 25 basis points is meaningless, if inflation is 5% to 7%.
Inflation is not temporary. The global supply crisis is expected to continue at least until 2023. 20% cargo container ships are sitting at sea waiting to get into ports that cannot move containers fast enough. Labor unions do not have enough longshoreman willing or able to work 24/7 needed to process cargo. Because of the delta variant there are not enough truck drivers or longshoreman to load ships in Asian ports. It appears Christmas products will not arrive in time for the holiday season this year. In addition many experts predict WTI crude oil prices will hit $100 a barrel in 2022 and 2023 because of lack of exploration capex by petroleum companies, with falling production and reserves and growing world demand. Rising oil prices increases the price of all commodities including gold. In summary the taper is actually QE and inflation is not temporary. You can only fool the public for so long. Some sold gold on the rumor of a taper and will buy when the taper does not materialize. Many believe that G7 central banks are addicted to balance-sheet expansion.
.
