Gold price can build on its 2% rise after Fed’s 75bp move – SSGA’s Milling-Stanley
Editor’s Note: With such volatility in the markets, stay up to date with daily news! Get our quick roundup of today’s must-see news and expert opinion in minutes. Register here!
(Kitco News) – Financial markets, including gold, breathed a collective sigh of relief after the Federal Reserve raised interest rates by 75 basis points. According to a market strategist, this could be an important turning point for the precious metal.
In an interview with Kitco New, George Milling-Stanley, chief market strategist at State Street Global Advisors, said gold’s recent drop below $1,700 was an exaggerated move and its pullback above $1,750 is a closer representation of its fair value. He added that growing economic uncertainty and ongoing geopolitical unrest will continue to support prices, especially as the Federal Reserve nears the end of its tightening cycle.
“I was pleased that gold prices were able to hold support around $1,700 an ounce and expect the market to build on the movement we are seeing now,” he said. he declared.
Milling-Stanley added that he was not surprised that gold prices rose 2% the day after the Federal Reserve’s monetary policy decision. He noted that the US central bank could have been much more hawkish; instead, Federal Reserve Chairman Jerome Powell struck a solid tone that further aggressive rate hikes will depend on the data.
Powell also said on Wednesday that the central bank would be ready to slow the pace of rate hikes as the economy reacts to its aggressive monetary policy.
“As of today, the markets have decided that there are still two months to go until the next meeting. And it’s time for a lot of data to come out,” he said. “The consensus seems to be in September, we’ll only be looking for a 50 basis point increase, and it could go down in October. Markets see light at the end of the tunnel,” he said.
Milling-Stanley added that markets are now focused more on the threat of a recession than Fed rate hikes, which could weaken the U.S. dollar and cap bond yields. At the same time, he added that even if the economy slows, the Federal Reserve is unlikely to be able to fully control inflation.
“As the fear of recessions resurfaces and I’m sure it will repeatedly over the next two months, I think gold will do well as investors look for safe-haven assets,” he said. he declares. “I expect growth to continue to slow. The US economy will get worse before it gets better, which is positive for gold.”
Milling-Stanley said he is maintaining his base case for gold prices to trade between $1,800 and $2,000 an ounce this year. He added that there was still a chance that gold would end the year above $2,000 an ounce.
“Given the growing number of major macroeconomic uncertainties, major geopolitical uncertainties, it’s hard to see why gold would stay where it is for the rest of the year,” he said. “I expect prices to rise, sooner rather than later.”
Along with the bullish macro environment, Milling-Stanley said he was optimistic about the recovery in physical demand in China. Although the country continues to feel the effects of COVID-19, Milling-Stanley said he does not expect the country to implement strict lockdown measures.
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.