All investment markets are predictive mechanisms — crystal balls, if you will, that discount future events by pricing assets today. But even though every market attempts to anticipate the future, none seem to do it as well as gold, asserts junior gold mining expert Brien Lundin, editor of Gold Newsletter.See also: Franco-Nevada: Golden RoyaltiesWith that said, gold is now looking ahead. And what it sees depends upon the success of the Fed’s battle against inflation. In fact, I believe it’s fair to say that the Fed is facing an historic turning point — a credibility crossroads from which it will be forced into one of two paths. And while both of these paths are bullish for gold, one is much more so.The CrossroadsFed Chairman Jerome Powell and his compadres at the central bank have been remarkably determined to put the inflation genie back in its bottle. They know the lesson taught by Paul Volcker in the 1970s: If you don’t kill it off completely, it will raise its ugly head again and again.That said, they have yet to confront the three factors that I feel will prevent them from pursuing this tightening policy much longer:1) The cost of servicing today’s massive federal debt.2) The recession.3) Something breaking.One of these factors, and perhaps something I haven’t considered, will force the Fed to halt its rate-hike crusade. Accepting that, if we step back and consider the big picture, there are two possible scenarios ahead:The Fed stops tightening after having vanquished inflation and gotten it close to the target level of 2%…or the Fed is forced to stop without having pushed inflation to anywhere near its goal.In the first scenario, the Fed pauses and/or pivots and does a victory lap. With every asset class being driven by central bank policy since 2008, I believe that stocks, bonds, commodities and precious metals all rally in that situation, as all investors need is the promise of easier money to pile back in.Story continuesThat would be good for us gold bugs, but the second scenario would be even better.Consider that if the Fed is forced to turn dovish without getting close to 2%, it would be proven powerless to combat inflation. The factors detailed above would remain in place…the debt would continue to prevent higher rates and the markets would remain addicted to easy money.Moreover, the investing environment would no longer be unequivocally bullish for everything. If inflation remained around 4%-5%, any returns from stocks and bonds would be depreciated at that rate. That might not be an impossible barrier to climb, but it would reduce returns considerably.See also: Extreme Appetite for Stocks in 2023In contrast, inflation at those levels, combined with continued easy-money policies, would be tremendously bullish for gold and silver. High inflation, which is simply a high rate of currency depreciation, is precisely what the monetary metals protect against. So, we would see portfolio allocations around the world shift at least slightly toward gold and silver.Bottom line? Gold is in a bull market – and should remain so no matter which path the Fed chooses.More From MoneyShow.com:

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