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The Fed's monetary policy is irrelevant and won't stop gold's push above $2,000 - abrdn's Robert Minter

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(Kitco News) - After leaving interest rates unchanged for the second time in this tightening cycle, the Federal Reserve's monetary policy is no longer a threat to the gold market, and the central bank's hawkish stance won't be enough to stop gold prices from pushing back through $2,000 an ounce and off to all-time highs, according to one fund manager.

In an interview with Kitco News, Robert Minter, director of ETF Investment Strategy at abrdn, said that there is very little stopping gold from hitting new all-time highs sooner rather than later.

"It's not just that the Fed has been irrelevant at this point, but its monetary policy has been irrelevant for gold for the last year, if not longer," he said. "If you look at where [Treasure Inflation Protected Securities (TIPS] are, where real yields are, gold prices should be below $1,000 an ounce, but they aren't."

Minter said that the biggest factor supporting gold prices continues to be central bank demand. According to the latest numbers from the World Gold Council, as of the end of the third quarter, central banks have purchased a record 800 tonnes of gold. The WGC said that purchases are on track to meet or even exceed annual record demand reported last year.

"We have seen 20 million ounces of gold flow out of global ETF markets, but that, and then some, has been consumed by central bank demand. At this point, ETF investors just have to stop selling and central bank demand will take gold prices higher and I think we are at that point," Minter said.

Not only does Minter expect investors to stop selling their gold, but he added that growing economic uncertainty and geopolitical instability will support gold's safe-haven allure. Minter said that even with the Federal Reserve's aggressive monetary stance, it's unlikely the central bank will be able to bring inflation down to its 2% target.

"The U.S. is now having to fund two proxy wars, the green energy transition remains an open checkbook, and the development of a supply of domestic materials to meet growing demand are all very real funding pressures," he said. "Even if the government held spending levels at current levels, the higher interest rates mean they will continue to spend more to service the debt. Deficit spending is not going away. We know how this will end with central bank support."

While some investors have been disappointed that gold has been unable to hold gains above $2,000 an ounce, Minter said that he continues to look at the bigger picture. He noted that $2,000 represents a major technical resistance level.

"It will take a lot of buying momentum to get a solid break through $2,000, but once it does, it will take gold to a new level," he said. "It's not going to happen today or tomorrow, but it's only a matter of time before gold breaks this triple top."

Powell is not hawkish enough to worry the gold market as prices hold near-term support

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