Make Kitco Your Homepage

Gold hasn't peaked yet, says SSGA's George Milling-Stanley

Kitco News

Editor note Get all the essential market news and expert opinions in one place with our daily newsletter. Receive a comprehensive recap of the day's top stories directly to your inbox. Sign up here!

(Kitco News) - Gold's brief overnight push to a record high above $2,080 an ounce could just be the start of a long-term rally through 2023 as market uncertainty and investor anxiety drive market prices, according to one market strategist.

In an interview with Kitco News, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said he expects safe-haven demand to overshadow any more rate hikes from the Federal Reserve.

"I don't think we have seen a peak in gold just get," he said. "I think gold is in a solid position to go higher."

The comments come as gold prices trade down from their record highs but remain in robust positive territory. June gold futures last traded at $2,057.30 an ounce, up 1% on the day.

While Milling-Stanley is bullish on gold, he added that investors do need to be careful because volatility could rise in the near term as markets are largely ignoring the Federal Reserve's outlook. After raising interest rates by 25 basis points Wednesday, the Federal Reserved moved its monetary policy into a more neutral position. However, Powell was very clear that the central bank is not ready to pivot to easing rates anytime this year.

"We on the committee have a view that inflation is going to come down not so quickly," Powell said in his press conference Wednesday. "It will take some time, and in that world, if that forecast is broadly right, it would not be appropriate to cut rates and we won't cut rates."

Despite this outlook, the CME FedWatch Tool shows markets expect interest rates to end the year 100 basis points lower, with the first rate cut coming as early as July.

"The market is believing what it wants to believe that that is dangerous," said Milling-Stanley. "Powell sees no scope for a rate hike this year and I am inclined to believe him. The last time he thought that the market wasn't listening to him last summer, he came out and slapped them down pretty hard. If inflation doesn't cool enough, Powell will raise rates in June."

Although the Federal Reserve's tightening cycle might not be over, Milling-Stanley said he doesn't expect this stance to have much impact on gold. He added that the Federal Reserve is still closer to the end of its tightening cycle and in this environment, the U.S. dollar will continue to struggle.

Gold market remains bullish after hitting record highs above $2,080, but volatility could increase

"The U.S. dollar peaked in October and we haven't seen much strength since. If the Fed is near the end of its tightening cycle, then the U.S. dollar will not be much of a threat to gold," he said.

Milling-Stanley said that he expects safe-haven demand for gold to be the biggest driver for gold. He added that gold remains attractive, specifically as the ongoing banking crisis is far from over.

"We don't see any weakness in Western investment demand for gold anytime soon," he said. "Investors are looking for protection to hedge against a recession, inflation, market turmoil and a potential banking crisis."

Adding to Milling-Stanley's bullish outlook is gold's ability to hold solid support levels around $2,000 an ounce. He explained that central bank demand is creating a solid floor in the market and this trend is not expected to end.

"Central banks are dangerously overexposed to the U.S. dollar and dangerously underexposed to gold and this is why they will be steady buyers of gold and this has nothing to do with the price at all," he said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.