JPMorgan ChaseJon Deane, former general manager and now chief executive of Trovio, said the global economy was "crossing the river by feeling the stones" and that explosive monetary and fiscal stimulus were testing the limits of global financial stability. The large-scale policy response to COVID-19 's crisis is the main reason for this situation. Dean believes that rising inflation is hard to come down and that hard assets such as gold may be the biggest winners in the medium to long term.

The global economic environment has never been seen before, and the Fed struggles to balance inflation and the economy.

Dean pointed out: "We are feeling the stones to cross the river to deal with a situation that has never happened before." After every major economic crisis, we adjust our economic arguments about how to look at markets from a central bank's point of view and how to manage the future of the economy. " In response to COVID-19, including

Governments around the world have adopted very supportive fiscal and monetary policies.

"there is excessive debt on the basis of near-zero global interest rates," says Mr Dean. This debt is both corporate and personal. If inflation gets out of control, this is a real concern. "

The main problem is how to reduce inflation. "if the Fed starts to raise interest rates in this environment, the impact on the economy will be considerable," Dean said. It is necessary for the Fed to raise interest rates without turning the economy around by 180 degrees, which makes it necessary for the Fed to do so step by step. "

This is a challenging environment for central banks around the world and requires them to deal with it. "think about it in terms of percentage," Dean explained. When the interest rate is 6%, you raise the interest rate by 10 basis points, which has a less significant impact on the borrower as a whole. However, if the interest rate is 1%, increase it by 10 basis points, and the repayment interest will increase by 10%. This will have a huge impact. "

The Fed faces the daunting task of getting inflation high enough to try to eliminate debt with inflation without letting it get out of control.

"this is the problem we face," Dean said. No disasters or major problems have been encountered so far. We may be on the brink of this situation, and we don't know how to deal with it. It's hard to get out of this situation. The Fed may continue to try to buy time, and if inflation does rise, it will try to control it rather than contain it. "

Once inflation rises, it may be difficult to recover.

On the issue of inflation, there are two views that dominate the market at present. One view is that, as the Fed says, inflation is temporary. Another view is that this is a long-term phenomenon and prices will continue to rise.

While the Fed insists that the rise in prices is due to pressure on supply channels as the global economy reopens, Mr Dean believes demand-driven inflation is also part of the problem.

"the market has ignored asset inflation caused by the release of record stimulus, which is creating demand-based inflation in the market," Mr Dean said. Pent-up consumption will naturally rebound even more and lead to inflation. I think inflationary pressures will definitely show up in this respect. "

As demand for goods increases, once prices and wages rise, they will remain high.

This could be a problem for the Fed's flexible inflation strategy.

The Fed has publicly expressed its flexible approach to inflation and expressed its willingness to tolerate higher inflation for some time. This is a risky decision because once inflation starts to heat up, it is hard to get it under control. The risk of soaring inflation is higher, which will lead to higher asset prices, especially defensive assets such as gold.

If the Fed takes one wrong step, it could be forced to raise interest rates quickly, undermining the healthy recovery of the economy. The Fed wants to let inflation fly for a while, but it is a risky decision because once inflation starts to heat up, it is hard to get it under control.

The price of gold is still low, and inflation is expected to rise sharply if it continues.

For Dean, the biggest winners will be physical assets such as gold, hard commodities and real estate.

He said. "the market environment is unprecedented and I am used to focusing on risks and returns. For me, the return is to be long real-world assets or hard assets, and it is clear that gold is at the core of it. In terms of assets, hard assets are the main winners, whether they are real estate, gold or hard commodities. They are the winners. "

Dean explained: "despite the upward pressure on gold, the price of gold has maintained a positive momentum. Currently, the fair value of gold is between $1800 and $1900. There is a lot of uncertainty about whether inflation is temporary or long-term. Last year, gold played the role of defensive assets. The trend of gold in 2021 is more driven by inflation than uncertainty. "

When it comes to gold trading, investors should consider what will happen in five years' time. "in terms of inflationary pressures, what do you think will happen?" Dean asked. We have gone from step-by-step stimulation to explosive stimulus. What does this mean for the economy? Can economic growth be sustained? Without a substantial increase in CPI, can we have a policy response? "

At present, most investors are happy to put a small amount of money into gold, but that may start to change next year. We are already starting to see some signs of inflation and as inflation views seep into the market, gold will follow, says Mr Dean.

In the medium to long term, if I am correct, inflation is indeed long-term, and gold prices will rise sharply and reach record highs in the next 12-18 months. But even if I am wrong, the surge in inflation is only temporary, and for gold, which is still low, the future trend is still upside.

Dean added: "since the 1970s, the stable development of all legal tender has been based on the market's trust in the government's ability to maintain economic stability. Once the government loses the ability to control inflation, the ability to ensure job growth, and the ability to ensure social security, then there will naturally be a lot of currency devaluation. I think this may also be an important catalyst for a sharp rise in hard asset prices. "