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Fed Balance Sheet Expansion Is Main Catalyst For Higher Gold Prices

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(Kitco News) - Central banks and governments around the world are flooding financial markets with liquidity and this will push inflation pressures higher along with gold prices, according to Chantelle Schieven, head of research at Murenbeeld and Co.

The research firm has updated its forecasts for this year, saying that prices could push above $1,800 an ounce by fourth quarter of this year.

Longer term, prices could push above $2,000 by the end of next year, Schieven said.

“The Fed itself, since March 4, has put in over $2.1 trillion, as of last Wednesday. Plus, you have the ECB, the bank of Canada, the bank of Japan, all your major banks adding their help to support markets, adding that liquidity into the market,” she said. “Long term, we're definitely bullish.”

Although interest rates will be lower for longer, Schieven said that she is actually watching the Federal Reserve’s balance sheet as a major driver for gold prices going forward. She added that it is unlikely the U.S. central bank will introduce negative interest rates into the market, which in turn would have limited impact on financial markets.

“We're looking for their balance sheet to hit somewhere around $12 trillion by the end of the year, which is basically double from where it is now,” she said.

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