Gold Still In Good Shape Following Hawkish Fed Meeting - George Milling-Stanley
(Kitco News) - The gold market is still in good shape despite prices falling to a three-week low after the Federal Reserve raised interest rates by 25-basis points, and struck a hawkish tone on future monetary policy, according to one analyst.
In a telephone interview with Kitco News, George Milling-Stanley, head of gold investments at State Street Global Advisors, said that he still sees resilience in the gold market as prices hold above the 200-day moving average, which comes in at $1,250.80 an ounce.
“As long as gold continues to hold above its 200-day moving average then the market is still in an uptrend and I think is on track to reach my target of between $1,350 and $1,400 an ounce,” he said.
Milling-Stanley’s comments come as gold was hit with a wave of selling pressure after Fed Chair Janet Yellen dismissed low inflation concerns, saying the central bank was still on track to raise interest rates at a gradual pace, and that it could start lowering its balance sheet “really soon.”
The selling pressure pushed prices to a three-week low at $1,252.70 an ounce; the market remains near its lows with August gold futures last trading at $1,256.60 an ounce, down 1.51% on the day.
Milling-Stanley said that he thinks Yellen’s comments have provided some confusion for markets as her inflation stance came on the same day that the core Consumer Price Index showed an annual increase of 1.7%, its lowest reading in two years.
Market confusion can be seen across all asset classes with gold selling off and bond yields higher; however, CME 30-day Fed Fund futures are only pricing in a 41% chance of a third rate hike by December. Expectations are at their lowest level in more than a month.
Going forward, he said that the Fed appears to be stepping away from paying attention to the data and it will now be more important to listen to what the Fed says.
“I will be paying very close attention to Fed speakers now and until September because it is what is going to drive interest rate expectations, not the data,” he said.
Despite the threat of a more hawkish Fed going forward, Milling-Stanley said that he remains optimistic because the market is not only holding key support, but is consistently building a base. He noted that gold prices are showing a pattern of being $75 higher around each Federal Reserve monetary policy meeting.
“I am encouraged by this wonderful pattern that I am seeing in gold,” he said “Higher lows will eventually lead to higher highs.”
Milling-Stanley added that despite U.S. interest rates, there is still enough uncertainty in financial markets and simmering geopolitical tension to keep a bid in gold through the long-term. The yellow metal continues to be an attractive asset in a world of overvalued equity and bond markets.
“We are seeing that these pullbacks in gold are consistently being bought as investors continue to see value at these levels,” he said. “What I am hearing is that many investors think this is the right moment to rebuild strategic allocations in gold.”