According to a market strategist, the overnight record high of gold price above $2,080 could be the start of a long-term rally to 2023 as market uncertainty and investor concern drive market prices.
Gold is in a solid position to go higher
Gold prices remain in strong positive territory despite trading down from record highs. George Milling-Stanley, chief gold strategist at State Street Global Advisors, says he expects safe-haven demand to dwarf the Federal Reserve’s rate hikes. In this context, the strategist makes the following statement:
I don’t think we’ve seen a peak under it yet. Gold is in a solid position to go higher.
The market believes what it wants to believe, but…
Milling-Stanley says investors should be cautious as gold is bullish. He states that volatility will likely increase in the near term, as markets have largely ignored the Fed’s outlook. cryptocoin.com As you follow, the Fed increased interest rates by 25 basis points on Wednesday. Thus, it moved its monetary policy to a more neutral position. But Powell was very clear that the central bank is not ready to ease interest rates anytime this year.
Powell said at a press conference on Wednesday, “As a committee, we are of the opinion that inflation will not come down very quickly. This will take some time. Also in this world, if this forecast is generally correct, it would not be appropriate to cut interest rates. That’s why we won’t cut interest rates,” he said. Despite this outlook, the CME FedWatch Tool shows that markets expect interest rates to end the year 100 basis points lower and the first rate cut to come as early as July. Milling-Stanley comments:
The market believes what it wants to believe, and that’s dangerous. Powell sees no room for rate hikes this year. I tend to believe him too. The last time he thought the market wasn’t listening to him was last summer, he showed up and slapped them pretty hard. If inflation does not fall enough, Powell will raise interest rates in June.
In this case, the US dollar does not pose much of a threat to gold!
The Fed’s tightening cycle is not over yet. However, Milling-Stanley expects this stance to have a lot of impact on gold. He says the Fed is still closer to the end of its tightening cycle. He also adds that in this environment, the US dollar will continue to struggle. Based on this, he comments:
The US dollar peaked in October. We haven’t seen much power since then. If the Fed is nearing the end of its tightening cycle, then the US dollar will not pose much of a threat to gold.
No weakness in investment demand for gold
Milling-Stanley expects safe-haven demand for gold to be the biggest driver of gold. He adds that especially since the banking crisis has not ended yet, gold still maintains its attractiveness. Startejist explains his views on this issue as follows:
We do not see any weakness in the West’s investment demand for gold anytime soon. Investors want to hedge against recession, inflation, market turmoil and a potential banking crisis.
Gold has the ability to hold solid support levels
Adding to Milling-Stanley’s bullish outlook, gold has the ability to hold solid support levels around $2,000. The strategist says central bank demand creates solid ground in the market. He also notes that this trend is not expected to end. Milling-Stanley ends his statements as follows:
Central banks are dangerously over-risked against the US dollar and dangerously under-risked against gold. So they will be constant buyers of gold and it has nothing to do with price.
