The New CS Board

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Fed's catch-22 scenario and why it means gold price will shine in 2021 - Adrian Day : https://www.kitco.com/news/2021-03-15/Fed-s-catch-22-scenario-and-why-it-means-gold-price-will-shine-in-2021-Adrian-Day.html

My Comment : Inflation is also a key ingredient

Excerpt:
He added that sentiment could once again shift in gold's favor as inflation pressures pick up and keep real interest rates in low to negative territory. Day noted that the rise in nominal 10-year yields would soon take its toll on the U.S. economy.

"I think we are very close to the point where the Fed is going to start talking about rates moving too far, too fast," he said.

Day added that the U.S. central bank could not afford to raise interest rates or let bond yields rise much higher because of the growing government debt.

"If you look at the federal government today, only about 10% of federal receipts are going to interest payments. That's the lowest rates in history," he said. "If the 10-year yield goes to say 2.5%, which is still low on a historical basis, those interest payments would more or less double. That's not a good place to be."

Not only will a low interest-rate environment be positive for gold, but Day said that more liquidity in the financial system would also provide long-term support for the precious metal. Last week Congress and U.S. President Joe Biden approved a $1.9 trillion stimulus bill, which includes a $1,400 for consumers.

Day added that financial markets would see a lot more liquidity later in the year when the economy opens up, and people start going back to work and spend the money they have been saving during the pandemic.