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'Unprecedented uncertainty' has bolstered U.S. dollar, could spell benefits for gold - George Milling-Stanley

Kitco News

(Kitco News) - The U.S. Dollar Index (DXY) gained 10 percent over the year, as investors turned to the dollar as a safe haven in this time of "unprecedented uncertainty," said George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors.

"The dollar has, for the last hundred years, probably been the single most trusted safe haven," he said. "I think that gold will probably come into its own and join the dollar in offering investors some safe haven protection in the course of 2023."

Milling-Stanley claimed that in addition to safe haven demand, the U.S. dollar's strength is due to higher Federal Reserve interest rates and dovish monetary policy in other countries.

"The most obvious [reason for U.S. dollar strength] is that the Fed has raised interest rates several times this year, and by significant amounts in the course of 2022," he said. "There are a couple of other reasons too. One of these is that other countries around the world are deliberately doing their best to weaken their currencies."

Milling-Stanley spoke with David Lin, Anchor and Producer at Kitco News.

Gold Market Demand

Although the gold price has fallen by 4 percent over the year, Milling-Stanley affirmed that gold has performed well compared to other assets.

"The gold price is down somewhat this year to date, but so are equities, both domestic and global," he said. "And so are bonds, both U.S. and global. Even the general commodity complex hasn't done that well."

Over the year, the S&P 500 fell 16 percent, and the NASDAQ is down 28 percent.

Milling-Stanley claimed that gold's performance would be further bolstered by growing investor demand.

"My sense is that investment demand is doing very well," he said. "The demand for [gold] bars and coins all over the world has done exceptionally well."

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Central Bank Gold: Mystery Buyers?

The World Gold Council reported on November 1st that central bank purchases of gold had hit an all-time quarterly high in Q3. Milling-Stanley pointed to the importance of this, since central banks account for "10 to 15 percent of total global gold demand."

A large amount of the recent purchases were conducted by mystery buyers. Although some have speculated that China and Russia are these buyers, Milling-Stanley said he didn't know, and that the data could take a while to be revealed.

"Not everybody is diligent about reporting [gold purchases] in a timely fashion," he said. "Some countries choose to keep some of their gold reserves, not in their official reserves, but in their treasury… which means they don't need to report it to the IMF. We've seen Japan do that on occasion. China has done it. Saudi Arabia has done it."

However, Milling Stanley said that the World Gold Council's research partners "may have a better indication" of who the mystery buyers are.

"I'm guessing… that those researchers are absolutely certain that they know who those buyers are, and how much they bought," he said. "But they are bound by confidentiality and that's how you get good research, and sometimes you have to accept it."

To find out Milling-Stanley's gold price outlook, watch the video above.

Follow David Lin on Twitter: @davidlin_TV

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