Investors want to hold on to their gold as rate hikes come – George Milling-Stanley of SSGA – Kitco NEWS | Jewelry Dukan

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(Kitco News) – Now is not the time to liquidate your core gold positions as the Fed has made it clear economic troubles are coming, according to a gold market strategist.

In an interview with Kitco News, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said gold prices could continue to struggle as three components of the US economy show resilient strength even if the Federal Reserve maintains its aggressive monetary stance.

Solid gains in the US dollar, trading near its highest level in more than two decades, relatively healthy consumer demand, and relative strength in stock markets are the three forces currently facing the gold market that are keeping prices in check.

“Right now the gold market is not calling the shots. Until we see these conditions change, the outlook for gold will remain somewhat limited,” he said.

Although stock markets were in a solid downtrend for most of the year and the S&P fell 21% in bear market territory, Milling-Stanley said the sell-off was mild compared to the rally of the past 13 years.

“Equity markets have been rallying since 2008 with cheap money and since 2018 with free money, and they’re down, but they have more to go if Powell wants to get inflation back to 2%,” he said. “Powell will keep raising rates until the stock market falls further. It could be a few months before investors start feeling the real pain of higher rates.”

Although investment demand has been weak for most of 2022, Milling-Stanley said the impending economic slowdown from rising interest rates is why investors should hold onto their core gold holdings.

“Inflation is still worryingly high and Powell has made it very clear that he has to inflict some pain on the economy in order to bring it down,” he said. “We face a lot of macroeconomic and geopolitical uncertainties and I certainly wouldn’t sell my safe-haven assets in this environment. At these prices I’d be looking to expand my core position, which I think is something we’re seeing.”

Milling-Stanley added that the threat of an economic slowdown and possible recession is one of the reasons gold has been able to hold the critical long-term support around $1,675. And while gold prices may struggle to climb higher into year-end, Milling-Stanley said he doesn’t expect gold prices to fall much lower.

“The sell-off in gold that we saw came from weaker hands from speculators who thought gold would rally back to $2,000. We have shaken off many of those weaker hands and remain with investors holding onto strategic core allocations. They’re not going anywhere,” he said. “The world is still a very uncertain place and that’s when you want to get involved in gold.”

Milling-Stanley’s comments on gold come after the US Federal Reserve hiked interest rates by 75 basis points on Wednesday. Along with the outsized rate hike, the central bank signaled that the Fed funds rate is likely to peak in 2023 at 4.6%.

However, Milling-Stanley said he doesn’t pay too much attention to recent economic forecasts. He added he doesn’t think the Federal Reserve has peaked and interest rates will continue to rise until inflation is brought under control.

“Nobody knows where interest rates are going. Powell is right when he sounds hawkish and continues to tell the market that he will deal with inflation and that his 2% target is unconditional. Eventually the market will believe him and then comes the pain,” he said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of the author Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not an invitation to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article assume no responsibility for any loss and/or damage resulting from the use of this publication.

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