Via GoldMoney Insights,

Over the past weeks, gold prices showed a remarkable resilience to the relentless rise in both nominal and real-interest rates. For the first time since 2020, gold prices are now reflecting slightly higher long-term inflation expectations than what is embedded in TIPS (breakeven inflation). However, we think overall markets are still much too optimistic about the Fed's (and other central banks) ability to choke off current high inflation rates with aggressive monetary policy.

We believe the Fed will stall economic activity before it can choke off inflation, which will force the central bank to reverse course long before it reaches its target interest rate. Current long term inflation expectations (2-10y) imply that investors are too complacent as they attribute near zero probability to such a scenario.