Fed won't reach 2% inflation in 2023, gold to see new highs

 Cornelius Christian @KITCO

The Federal Reserve won’t reach it’s 2% inflation target in 2023, but gold will see new highs, according to Gary Wagner, Editor of TheGoldForecast.com.

“There are no tables, no graphs, and no studies that suggest they [The Fed] are going to hit a 2 percent target in 2023,” said Wagner. “If in fact they act upon what they have projected and what they have stated, we’re going to be inundated with strong interest rates throughout the entire year.”

At the last Fed meeting, the Federal Reserve Open Market Committee (FOMC) projected a 5 percent Fed Funds Rate in 2023.

Despite forecasting a grim year in terms of inflation and interest rates, Wagner, a technical analyst, said that he remains “bullish for gold.”

“I’m looking for gold to hit $2,250 to a high of maybe $2,400,” he predicted. “I definitely believe it’s going to breach $2,000 without any question by the second quarter… I’m looking for new all-time highs next year.”

Wagner spoke with David Lin, Anchor and Producer at Kitco News.

U.S. Government Debt

As the Fed raises interest rates, some analysts have raised concerns about the sustainability of U.S. public debt. As rates rise, the government will have to dedicate a larger portion of its budget to interest payments.

“When interest rates move higher, [the government] will borrow more money to service the debt that they already have,” Wagner explained. “In essence, they’re on a treadmill running backwards at a certain point, in terms of interest rates.”

There is a concern, Wagner suggested, that as government deficits widen, and Congress either borrows or “prints” money to pay for more spending, that inflation could spiral out of control.

“What is the difference between that and a dog chasing its tail?” He said. “It’ll never catch it, but it will continue to run in a circle. That’s the dilemma that the government is facing.”

Gold and Geopolitical Risks

Gold is perceived as a hedge against geopolitical risk, but Wagner said that the relationship between geopolitics and gold is not clear-cut.

“When we had missile tests by North Korea, we didn’t get huge jumps [in the gold price],” he observed. “I thought about what gold has done as the war in Ukraine continues, and gold does not seem to react to that. I think you get an initial knee-jerk reaction, but the public gets jaded to that information over time. The public has a short memory, so to speak.”