Shifting monetary policy trends from central banks will come with “profound risks” – and gold may be the answer to hedging them, says BNY Mellon. A number of central banks around the world have already taken steps towards normalising monetary policy, such as the Federal Reserve, the European Central Bank, the Bank of Canada, Riksbank, Norges Bank and “maybe, just maybe, the Bank of Japan”, according to a briefing note by BNY Mellon senior currency strategist Neil Mellor. However, this policy normalisation is not without “profound risks”.
Central banks would be looking to safeguard against these risks, and “all things considered … any central bank’s preferred risk must surely be an inflation overshoot (relative to target)”. The monetary policy trend and associated risks could have a surprising effect on investment markets, the note said. “This segues to gold and the possibility of it being a surprise performer in 2018,” it said.
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