Federal Reserve policy changes and rate hikes won’t impact on gold’s outlook for the year says one industry expert, who maintains that the gold bulls will remain in charge and on course for a super strong end to the year.
Chief gold strategist, George Milling-Stanley is confident that in the face of growing market volatility and risk aversion, gold prices will enjoy a strong run through to the end of the year with trading between £1,456 ($1,800) and £1,618 ($2,000) expected to remain the norm.
This show of support for the gold bulls comes just after the Federal Reserve completed its first 50 point rate height. It has also indicated that two additional 50 point increases will also take place at the next two Federal Reserve meetings, though there are fears that the bar could even be lifted to 75 points.
Milling-Stanley says the rate increases are supportive of a stronger gold market but spell trouble for equities. He explained, “Mr. Powell has provided the market with excellent forward guidance to avoid market shocks and surprises. He has delivered on the job of a Fed Chair at this particular meeting. As I have said before, gold has nothing to fear from rising interest rates. Equity markets, however, are a different story. They will have something to fear from higher interest rates.”
The gold bulls are also benefitting from turbulence elsewhere and actually gain ground during geopolitical and economic uncertainty, while the stock market historically struggles. We’re seeing this happen right now, with risk off sentiment and a growing demand for gold’s safe haven protection.
He added, “There are more threats to the likely course of the stock market right now than there are to the gold market. Looking at investment demand, we are seeing more strategic interest in gold. Investors are saying: ‘I need more diversification in my portfolio, if the economy continues to be threatened.’”
“Real rates are beginning to turn mildly positive, and that will impact people’s perceptions. But I don’t think that we are going to see a strong rise in real interest rates that could throw a spammer into the gold market.”
