In a year where inflation has hit over three-decade highs, gold has struggled throughout much of the year, with the yellow metal down over 4% YTD. This comes amid sticky and not so transitory inflation pressures forcing the Federal Reserve to remove emergency stimulus much quicker than markets had expected. Therefore, dampening the appeal for gold, particularly with real yields finding a bottom.
At the December meeting, the Federal Reserve announced that it would double the pace of its QE taper (Figure 1.), which in turn brought forward expectations of a Fed rate hike. Those expectations were further bolstered by the central bank shifting its dot plots to project three rate rises from the prior of one, which was also more hawkish than the market consensus call of two 2022 rate rises.
