The Biggest Risk This Year: 'China's Zero COVID-19 Failure'... "Gold Prices Will Rise 20%"

Geopolitical Risks Identified by US Think Tank Eurasia Group
Wall Street 'Oracle' Vice Chairman Byron Wien Also Presents 'Top 10 Predictions'

[Asia Economy reporters Seulgina Jo and Hyunwoo Lee] The biggest global geopolitical risk in 2022 is identified as the failure of China’s COVID-19 prevention policy, known as the ‘Zero COVID-19’ policy. The U.S. think tank Eurasia Group warns that this could exacerbate global supply chain disruptions and inflationary pressures. Byron Wien, vice chairman of Blackstone and known as the ‘Wall Street guru,’ predicted that while the U.S. stock market will remain sluggish due to interest rate hikes this year, the price of gold, a representative safe-haven asset, will rise more than 20% to reach an all-time high.

On the 3rd (local time), Eurasia Group released its ‘Top 10 Global Geopolitical Risks for 2022’ report, stating that the failure of China’s Zero COVID-19 policy is the greatest geopolitical risk this year. Eurasia Group said, “China will face the greatest difficulties ahead due to the failure of the Zero COVID-19 policy,” adding, “Most of China’s population lacks antibodies against the Omicron variant. Repeated lockdown measures will continue even after Xi’an.”

If lockdowns are repeatedly imposed in China, known as the ‘world’s factory,’ global shortages of raw materials and equipment, as well as supply shortages in all sectors including logistics and pharmaceuticals, will inevitably worsen. Eurasia Group expressed concern, saying, “Prolonged supply chain issues could cause severe inflation, and demand suppression and labor shortages due to lockdowns will also pressure price increases.” They also analyzed that global leadership capable of resolving the pandemic situation is unlikely to be expected.

Alongside this, Eurasia Group selected the following as major geopolitical risks for this year: ▲ U.S. midterm elections ▲ U.S.-China conflicts ▲ regulatory failures on digital giants ▲ the recent escalation of Russia’s threat to Ukraine ▲ Iran’s nuclear issue ▲ challenges in green energy policies ▲ China’s focus on domestic consumption ▲ and Turkey’s authoritarian regime.

In the economic sector, investors’ attention is focused on the U.S. Federal Reserve’s interest rate hikes and their impact on the stock and commodity markets.

Wien, who released the 37th edition of the ‘10 Surprises for 2022’ report this year, expects the Fed to complete tapering (asset purchase reduction) and raise interest rates four times by the end of the year. This is more than the three hikes suggested in the Fed’s dot plot last month. Accordingly, the S&P 500 index is expected to show little progress despite strong corporate earnings this year. Wien also predicted that inflation will not be merely ‘transitory.’

The price of gold, regarded as a representative safe-haven asset, is forecast to rise 20% and reach an all-time high. Byron Wien mentioned, “Investors will seek gold as a safe asset and a hedge against inflation risk.” He added that West Texas Intermediate (WTI) crude oil, currently priced in the $70 per barrel range, could surpass $100 this year. Furthermore, despite the recent rapid spread of Omicron, he predicted that major gatherings will return to pre-COVID-19 pandemic levels by the end of this year.

This content was produced with the assistance of AI translation services.