According to the expert, over the past year, the yellow precious metal has established a higher trading range. Numerous uncertainties and risks associated with the pandemic and sweeping financial and monetary policies have driven the price of gold to new highs, Foster said.
But while the price remains at historically high levels, many gold investors have been disappointed with the gold's price performance over the past year. In fact, even with inflation skyrocketing, he expected significant growth that didn’t pan out in 2021. However, in the face of inflation, one should not forget about other factors of influence, such as the growth of the dollar and the hype in financial markets (stocks, ETFs, real estate, cryptocurrencies).
Despite the decline in investment demand, physical demand has supported the price of gold over the past year. For example, demand from central banks has returned to pre-pandemic levels. Demand from India and China has also risen markedly.
In addition, Foster does not exclude that in the future gold will react more strongly to inflation: “In the last 50 years there have been only two major inflationary waves. The first was in the 1970s, the second - from 2003 to 2008. In each of these inflationary periods, gold underperformed commodities in the first half and outperformed them in the second half of the period. It seems that markets only take inflation seriously when it turns out to be an intractable problem.”