Financial markets, including gold, collectively breathed a 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.
“More than $1,750 fair value for gold”
State Street Global Advisors chief market strategist George Milling-Stanley comments on the latest developments in the market. The strategist says the last move where gold fell below $1,700 was exaggerated. Therefore, he notes that a pullback above $1,750 is more in line with its fair value. He also states that increasing economic uncertainty and ongoing geopolitical turmoil will continue to support prices. He adds that this will be particularly evident as the Federal Reserve approaches the end of its tightening cycle. In this context, the strategist makes the following statement:
I was pleased that gold prices were able to hold support around $1,700. I hope the market can build on the movement we’re seeing right now.
“Markets see the light at the end of the tunnel”
The day after the Fed’s monetary policy decision, gold prices rose by 2%. Milling-Stanley states that he is not surprised by this. Meanwhile, he notes the Fed could be much more hawkish. Instead, Fed Chairman Jerome Powell has given a firm tone that more aggressive rate hikes will depend on the data. cryptocoin.com Powell also said on Wednesday that the central bank will be ready to slow the pace of rate hikes as the economy reacts to aggressive monetary policy. The strategist makes the following assessment:
As of today, the markets have decided that the next meeting is two months away. And a lot of data will be released over time. It looks like there is agreement in September. We will only expect a 50 basis point increase and it may fall further in October. Markets see the light at the end of the tunnel.
“I think gold will be good”
Milling-Stanley says markets are now focused on the threat of a recession rather than the Fed’s rate hikes, which could weaken the US dollar and limit bond yields. He also adds that even if the economy slows, the Fed is unlikely to fully control inflation. Accordingly, the strategist makes the following comment:
I think gold will do well as people’s recession fears resurface and investors seek safe-haven assets. I’m sure it will be in the next two months. I expect growth to continue to slow. The US economy will get much worse before it gets better than positive for gold.
“I expect gold prices to rise as soon as possible”
Milling-Stanley notes that it maintains its baseline scenario for gold prices to trade between $1,800 and $2,000 this year. He adds that there is still a chance for gold to end the year above $2,000. Startejist explains his predictions as follows:
Major macroeconomic uncertainties are mounting. Similarly, large geopolitical uncertainties. Given this situation, why should gold stay where it is for the rest of the year? I expect prices to rise soon.
Alongside the rising macro environment, Milling-Stanley says it is optimistic about physical demand in China. The country continues to feel the effects of Covid-19. However, Milling-Stanley says it does not expect the country to implement strict quarantine measures.
