(Barron’s) Nearly a year since gold marked its highest price on record, the precious metal has little to show for it.

On Aug. 6, 2020, gold futures settled at $2,069.40 an ounce, their highest finish on record. A day later, prices hit an intraday, all-time high of $2,089.20.

The record highs “were driven by the initial flight to safety, followed by the reaction to the massive monetary and fiscal policies” put into play to strengthen the economy in the wake of the pandemic, says William Cai, co-founder and managing partner at Wilshire Phoenix. Due to the pandemic, the U.S. Federal Reserve has kept its benchmark interest rate close to zero, benefiting gold.

Prices for the metal, however, have eased back by 14% from the record and look to suffer the first yearly loss since 2018.

The pullback in gold is a “healthy consolidation,” with the market digesting the effects of those monetary policies and potential follow-on policy adjustments, Cai says. Inflation, meanwhile, looks to be the major factor that will continue to support gold prices in the medium term, he says.

The Fed has helped to ease some of the uncertainty driving demand for gold as a haven. The central bank’s loose monetary policy contributed to the creation of an “economic bubble” to offset Covid-19’s harmful economic impact, says Drew Rathgeber, senior futures broker and branch manager at AIO Capital.

On March 8, gold futures dropped to $1,678, their lowest since April 2020, amid strength in the U.S. dollar and a rise in Treasury bond yields, which can dull demand for gold.

But don’t count gold out yet, says Rathgeber. “A perfect storm is setting up for gold…to go much higher.” Inflation is “here to stay for a while,” in part due to the Fed’s loose monetary policy and its failure to highlight “cost-push inflation,” he says. A rise in the cost of production and raw materials leads to cost-push inflation, and inflation can decrease the value of the dollar over time, raising gold’s investment appeal.

The Fed has said the sharp rise in inflation this year is “transitory,” suggesting that the central bank will not tighten monetary policy and will continue to hold off raising interest rates, which is supportive for gold. On July 28, the Fed reiterated that it believes higher inflation this year reflects transitory factors. It also said the U.S. economy has made progress toward reaching its standards for easing back on its bond-buying program, but not enough for it to start doing so yet.

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