At a time when inflation erodes personal wealth and threatens the economy, the Federal Reserve reiterated its commitment to stabilize consumer prices.

However, Axel Merk, President and chief investment officer of Merk investments, said the economic outlook could become more chaotic because the Federal Reserve is facing a tough fight against inflation.

Merk said that although the price of gold has fallen below $2000 and it is difficult to attract new bullish momentum, gold is still an important investmenmetatrader5白标t tool. It continues to function as a defensive asset and a hedge against inflation.

He said, "gold is always an asset that you are happy to have yesterday, but you don't know why you have it tomorrow."

His comments came as gold was trying to hold on to key support of around $1850 per ounce. The latest report of gold futures in June was US $1847.60 per ounce, which was basically flat in the session.

Although gold performed well in the first quarter, the recent price trend was disappointing, but he pointed out that gold continued to outperform the stock market.

He said, "we often talk about that in the lmetatrader5白标ong run, gold has no correlation with the stock market, which does not mean that when the S & P index falls, it will always rise, which means that it sometimes synchronizes with the S & P index, and sometimes reverses it. Sometimes, gold will play its own role." "Price changes are part of our environment. The Federal Reserve used its action to lift the lid of the pressure cooker, which is when things become a little chaotic."

Although the Fed took a tough stance on inflation, he said he did not believe that the Fed would take absolutely necessary measures to reduce consumer prices at premetatrader5白标sent. He added that he believed there was an increasing risk of stagflation.

"One definition I heard of stagflation is inflation, plus policy mistakes, because when inflation occurs, the right approach is politically unattractive," he said

Merk investments is taking stagflation risks seriously because it recently launched a stagflation ETF (nyseara: stgf). This new fund provides investors with exposure to tips, gold, oil and US real estate. He pointed out that all these assets can perform well in a high inflation environment.

He added that the Fed was not only lagging behind the inflation curve and tryimetatrader5白标ng to catch up quickly, but also that changes in geopolitical trends were affecting long-term expectations. He pointed out that after the global supply chain was seriously affected by the epidemic and the war between Russia and Ukraine, countries around the world are trying to develop their own domestic resource supply. "We are entering a new normal because the cost of business transfer and repatriation is higher," he said

Merk said he liked gold as a portfolio stabilizer when policymakers were busy solving the current crisis without focusing on the larger long-term prospects.

He said, "if you change frmetatrader5白标om completely eliminating risks to reintegrating some risks, there will be distortions, right? You make all kinds of noise." "When you fall into chaos like us, we will have unstable policies, so it may be a good thing to have some diversification and stability in your portfolio."