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Gold Price: We Haven't Seen The Highs For 2018 Yet - State Street

Kitco News

(Kitco News) - While the gold market appears to have entered a consolidation period, one analyst says that this is just the beginning of the rally this year.

In a telephone interview with Kitco News, George Milling-Stanley, head of gold investments at State Street Global Advisors, said because of the strong sentiment in the gold market, he thinks it is only a matter of time before gold breaks above its recent four-month highs and retests the highs from 2016.

“I don’t think we have seen the highs in gold for the year,” he said. “I think it is a very real possibility that gold pushes to $1,400 sometime during the year.”

Milling-Stanley said that he is not expecting gold to see any real correction until early March when the market will start to focus on potential interest rate hikes. The Federal Reserve will meet next week -- its first monetary policy meeting of the new year -- but markets are not pricing in a rate hike until March 21.

“The market doesn’t feel toppy right now. I think the seasonal factors that have been bullish for gold can run for a couple more months,” he said.

Helping to push gold higher is a weaker U.S. dollar, which has fallen to fresh three-year lows against a basket of global currencies. Milling-Stanley said that he doesn’t expect this trend to change in 2018.

He added that the U.S. central bank will not be in a hurry to raise interest rates rapidly this year, which will keep real interest rates low and keep pressure on the U.S. dollar.

“I feel really good about the gold market in 2018. But I have serious anxiety for the U.S. dollar,” he said.

Milling-Stanley said that he is also suspicious that the U.S. economy will see significant growth in 2018 despite the fact that the U.S. government has passed historic tax cuts to increase consumption.

Instead of spurring growth, Milling-Stanley said that he expects companies to hoard their new found tax windfall and use it to buy back stocks, supporting an overextended equity market.

“I have serious concerns for supply-side economic policies and I don’t believe the tax cuts will generate enough growth,” he said. “Instead the tax cuts are going to drive up the deficit, which nobody seems to be talking about anymore.”

While equity markets could continue to push higher, Milling-Stanley said that he does not expect this will be much of a headwind for the gold market in 2018. He explained that gold will remain an attractive portfolio diversifier as more and more investors take defensive positions to protect against a potential market correction.

“We are in the ninth-year of a bull market in equities and while I don’t know when it will end, I do know that it will end,” he said.

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