(Kitco News) - Looking beyond near-term market volatility, gold prices have the potential to move higher through the rest of the year, even though a push to $3,000 an ounce is considered unlikely, according to one market strategist.
In an interview with Kitco News, George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors, said that gold’s current price action is a reasonable response to the Federal Reserve’s latest monetary policy decision.
On Wednesday, the Federal Reserve cut interest rates by 50 basis points, bringing the Fed Funds rate to a range between 4.75% and 5.00%. At the same time, the central bank signaled two more rate cuts this year and expects to reduce interest rates by 100 basis points in 2025.
Milling-Stanley said the Fed’s monetary policy decision should continue to support his broader gold price targets. In June, Milling-Stanley upgraded his gold price forecast, setting a base case between $2,200 and $2,500 an ounce. Meanwhile, his bullish scenario places gold between $2,500 and $2,700 an ounce.
“I think that Wall Street people calling for gold to be at $3,000 by year-end are being a little heroic,” he said. “I don't see that happening within the next three or four months. But it's a perfectly good possibility for next year, provided nothing happens to change the trajectory of interest rates we are expecting right now.”
Looking ahead, Milling-Stanley sees solid potential for gold to rally to $2,700 an ounce by the end of the year.
“Now that we have the reality of what is clearly a sustained cycle of rate cuts, there is a serious possibility that the dollar will continue to weaken. And if I'm right about the dollar, then I think there's a good possibility that gold could continue to strengthen,” he said.
However, in the near term, Milling-Stanley remains relatively neutral on gold. He said that, given the Fed’s guidance and Powell’s comments, he sees gold currently trading around fair value. Spot gold last traded at $2,589.70 an ounce, up more than 1% on the day.
Although markets initially saw the Federal Reserve’s 50-basis-point move as aggressive, the dovish sentiment was later tempered by comments from Federal Reserve Chair Jerome Powell.
“There is nothing in the SEP that suggests the committee is in a rush,” Powell said during his press conference. “This process evolves over time.”
Milling-Stanley said that, given market expectations, the Fed’s 50-basis-point cut made sense. He noted that a 25-basis-point cut would have added unwanted volatility in equities.
“Even if we get another couple of 25-basis-point cuts, as the dot plot indicates, for the rest of this year, we're still going to have very high interest rates,” he said. “Powell still has a lot of work to do to get interest rates down to whatever his target may be.”
