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Trade wars and Brexit not yet resolved, market uncertainty will continue to support gold prices in 2020 - State Street Global Advisors

Kitco News

(Kitco News) - Market anxiety has alleviated slightly as trade tensions between the U.S. and China have eased and the political outlook in Britain has stabilized, but one market analyst said that gold will remain on investors ’ radar as uncertainty is not going away in 2020.

A phase one trade deal, no new tariffs on Chinese imports, and a solid majority victory for Boris Johnson ’s Conservative Party in the U.K. has reduced some fears in the marketplace, but will still impact investor sentiment in 2020, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said in an interview with Kitco News.

George Milling-Stanley, chief gold strategist at State Street Global Advisors

“Basically this phase one deal will bring trade negations back to neutral territory,” he said. “The real issues are far from resolved and that will continue to add uncertainty to financial markets and that will be good for gold.

“Trade tensions have eased but they are far from gone,” he added.

Looking at the U.K., Milling-Stanley said that although Johnson now has a majority to push through Brexit, investors still don ’t know the impact of leaving the European Union will have on the economy.

Milling-Stanley added that there is still plenty of support for gold in 2020 and he sees the yellow metal embarking on a long-term sustainable rally in a new era of uncertainty. For next year, Milling-Stanley said that he sees gold prices trading in a range, between $1,450 and $1,600 an ounce.

“We have entered an environment of sustainable moderate growth in the gold price for the foreseeable future,” he said. “Geopolitical volatility will continue to be part of the background of general uncertainty that has been very favorable to gold for several years now.”

Milling-Stanley ’s comments come as gold prices hold relatively steady into the end of the year. February gold futures last traded at $1,479.10, up 15% since the start of the year.

“If gold finished the year at current prices we would say that it has had a fabulous year with tremendous gains,” he said.

In a domino-style effect, Milling-Stanley said that market uncertainty will lead to episodic volatility throughout the year, which will force the Federal Reserve to maintain low interest rates, keeping real interest rates close to negative territory, which will make gold an attractive safe-haven asset.

Although the Fed has signaled that it is on hold for 2020, Milling-Stanley said that he is not convinced they will be able to maintain a neutral stance in the face of global economic weakness.

However, he added that even if the Fed does raise interest rates next year on improving economic conditions, the impact on gold would be limited.

“We have entered in a new era of low interest rates; that is the broad trend gold investors should focus on and that will remain in place despite the odd 25 basis point move from the Fed,” he said. “I don ’t think inflation is going to go lower so the interest rate environment in real terms is going to be even more favorable for gold.”

Milling-Stanley added that he is also bullish on gold as economists are expecting to see a recovery in emerging markets, which should lead to increased jewelry demand in critical gold markets.

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