Gold’s price has seen some action recently, again climbing past strong resistance at $1,800 to a high of $1,813 before finishing the day above $1,790. Does this mean that market participants are finally, but very slowly, waking up to the economic reality? TD Securities’ analysts seem to think so, having initiated a $1,850 and $2,000 long call spread for gold’s price for April.

In their recent report, the commodity analysts said that inflation, stagflation and dubious tightening all play a part in the bullish forecast for the next four months. Even with nothing to support the notion, the markets still seem to be fully pricing in some kind of Federal Reserve tightening. This includes a reduction of the balance sheet, hikes and so on. This sentiment has been weighing heavily on gold over the past months, with November being the targeted date. It remains to be seen how the Fed intends to tighten its monetary policy in the current environment.

Wade Guenther, managing partner at Wilshire Phoenix, recently told Kitco that he believes the Fed won’t be able to rein in inflation. Guenther has also dismissed the idea that supply chain disruptions are being caused by consumer spending, something that has garnered quite a bit of ridicule as of late, and supports a far more grounded view that the cause is across-the-board inflation.

With the ever-hawkish Fed Chair Jerome Powell going as far as to admit that these disruptions could persist well into next year, it’s turning inflation into an even bigger problem, and also a worldwide one. In Canada, the latest report on consumer prices showed that they have risen to their highest level in more than a decade.

As TD Securities’ analysts noted, this is part of why stagflation is becoming a greater concern with every passing week. The threat of energy prices rising has turned into what the analysts call a global energy crisis, one that seems to be intensifying. There is also much to be said about crumbling economies, an issue that everyone seems to be ignoring right now. With hyperinflation being mentioned on one end and parallels being drawn with the Great Depression on the other, we might yet see the term stagflation redefined.

Another interesting bit of information is that speculators have, mostly based on optimistic sentiment, liquidated more than 190 tons of paper gold this year. Yet the massive dump, as opposed to slicing the metal’s price, only seems to have thwarted its rise for the time being.

Regardless of whether we see inflation or stagflation, TD Securities says that the conflux of factors appears to have primed the gold market for a very strong move upwards by early next year. In the shorter term, Saxo Bank’s head of commodity strategy Ole Hansen said that a breakout above $1,835 could move a lot of interest away from the stock market and into gold.