The Fed is likely to increase the interest rates of about 3.5 %this year and potentially 4 %next year. According to a market analyst, even in this case the gold market will remain in a healthy position.
“Gold investors began to understand that the FED was in a difficult situation”
State Street Global Advisors Head Gold Strategist George Milling-Stanley, recently gave an interview. Kriptokoin.comAs we have reported as the FED, an increase of 75 basis points in the last 28 years made the biggest move. Following the decision of the Startejist Fed, he is not surprised that gold is in good position.
As it will be recalled, inflation reached the highest level of 40 years with 8.6 %last month. This pushed the Fed to tighten the monetary policy in an aggressive way. However, Milling-Stanley says gold investors are starting to understand that Jerome Powell, the FED and leader Jerome Powell, is in a very dangerous position. The strategist makes the following statement:
The federal reserve walks on a very narrow rope. Powell wants to drown some demand problems to reduce inflation. But he doesn’t want to recess the economy.
“In both cases, gold wins gold investors”
Milling-Stanley also says that every decision of the FED will be positive for gold. He explains the reason for this view as follows:
If the FED does not raise interest rates quickly, inflation will continue to rise. On the other hand, they will face the risk of recession if it moves very quickly. Both of these scenarios are positive for gold. In both cases, gold investors win.
The strategist is not worried about the rise of real interest rates
Increased risks on the US economy were also reflected in the Central Bank’s latest economic forecasts. The US Federal Bank predicts that the US GDP will grow by 2.8 %and 2.2 %GDP, respectively in the next two years.
The Federal Reserve’s aggressive monetary policy stance will begin to raise real interest rates. This is a negative wind for gold as an inefficient being. However, Milling-Stanley says investors should focus on a wider view.
Strategist, real interest rates will not be high enough to provide significant protection to investors from increasing volatility and economic uncertainty. He says that the study shows that real returns should be above 2 %before creating a problem for gold investors. In this context, the strategist uses the following statements:
We are still far away from where there are returns that will scare investors.
“Gold continues to be the best defense asset”
In addition to low interest rates, Milling-Stanley says that gold will continue to be an important portfolio diversion. The reason for this is that both stock and bond markets show the sale. Gold protects the floor after the Fed’s 75 basis point movement. However, S&P fell more than 3 %on Thursday.
In addition, yellow metal prices have not changed relatively during the year. On the other hand, S&P 500 fell by more than 23 %and entered the bear market area. The strategist makes the following assessment:
Despite the increasing interest rates, Gold continues to be the best defense asset that investors need. Dear Metal can answer many questions that investors are currently asking to them and their advisors.
How much should the yellow metal be in a good portfolio?
So how much gold in an investor’s portfolio needs to keep gold. Milling-Stanley says that investors should keep an average place between 2 %and 10 %in their portfolios. The strategist also records:
At problematic times, research shows that investors should double the risks of up to 20 %. I’m not saying that everyone should go to 20 %. However, according to our research, this is the most appropriate level mathematically.
