Gold continues to fight to make stable gains over $ 1,700. Prices have the possibility to move lower than the rest of the year. However, a market strategist says the current level of gold prices represents long -term value for investors.
“I would be careful about gold prices”
Stephen Land, Vice President and Portfolio Manager of Franklin’s Franklin’s Golden and Precious Madets Fund’s Franklin Templeton, says that the current decrease tendency of gold makes sense as the federal reserve continues to raise interest rates. However, looking beyond short -term volatility, he adds that he is optimistic about precious metal. In this context, Land makes the following statement:
I would be careful about gold towards the end of the year. However, it is quite interesting time to look at it as a value game for everyone with a 12 -month time range.
“Probably the current tightening cycle will end early”
Increased interest rates continue to put pressure on gold prices. However, Land says that investors have started to question how much the central bank has left. The markets expect the US central bank to increase the FED fund rate of 75 basis in November and December. It also predicts that the final interest rates will increase to 5 %in the first half of 2023.
However, the Fed’s monetary policy begins to upset global markets and forces Boj and Boe to intervene in local money and bond markets. Land says that these problems will only continue to grow. In addition, it probably records that it will probably cause the existing tightening cycle to end early. From here, Land makes the following assessment:
The Fed’s action exports a lot of inflation from the United States. Moreover, it is uploading most of this burden to other countries. At one point, this will cause some geopolitical problems that will affect the US. The FED is making the right moves based on local data. However, they are aware of their effects on the rest of the world.
“FED, stopping interest rate hike is enough for rise”
Due to the increasing geopolitical uncertainty, Stephen Land adds that it is not possible that the Federal Reserve would raise the high interest rates enough to restore inflation to its target for 2 %. Land continues, using the following statements:
Federal reserve does not have full control over inflation. As the rates begin to slow down, the state of gold and the role of protection from an inflation risk becomes a little clearer.
Land says he doesn’t even need a pivota in his monetary policy to draw a new rise acceleration under the FED in the current environment. The Fed states that it would be enough to stop the interest rate raising, to end the downward trend of gold. In order for the Fed to finish the current tightening cycle, investors will have to wait a little longer.
“It’s time to take a position for higher gold prices now!”
However, Land notes that there are still great opportunities in the precious metals industry. Land makes the following statement:
The fact that gold prices are over $ 1,650 still represents a solid value for mining companies. On average, mining companies see about $ 200 profit margin at current prices. It is not the same as the margins we see at the beginning of the year. But this is still a solid job. $ 1,650 is not a terrible price compared to what we have seen in the past.
Land records that it performs below the gold market in the current decrease trend of the mining sector. Nevertheless, when the market returns, it expects miners to perform better. “Now it’s time to position yourself for higher gold prices. There’s too much leverage in mining shares,” he says.
