(Kitco News) - Gold prices are not only rallying to a fresh all-time high within the first month of the new year, but the precious metal is also attracting increased attention in mainstream financial markets.
On Wednesday, State Street Global Advisors said that gold’s price action, which is expected to push beyond $3,000 an ounce in the not-too-distant future, will be one of the top three surprises for investors this year.
“Gold reached more than 40 all-time closing highs last year on its way to delivering a 25.5% return to investors… As stocks and bonds suffered double-digit losses, gold demonstrated its diversification power by maintaining its value throughout the year… Geopolitical risks and structural transitions in monetary and fiscal policies should also boost the prospects for gold,” said Michael Arone, Chief Investment Strategist at SSGA, in the report.
In an interview with Kitco News, George Milling-Stanley, Chief Gold Strategist at SSGA, said it is not surprising that renewed investment demand is driving gold prices back to all-time highs, as investors seek protection against inflation and market volatility.
Milling-Stanley reiterated his 2025 price forecast, assigning a 50% probability that gold will trade between $2,600 and $2,900 and a 30% probability that prices could reach as high as $3,100 an ounce.
He emphasized that gold remains an attractive portfolio diversifier, particularly as investors brace for heightened market volatility this year. His comments come as North American equity markets suffered a significant blow on Monday when global investors offloaded tech and AI-related stocks following China’s announcement of a cheaper artificial intelligence model, challenging the dominance of U.S. technology.
Milling-Stanley added that persistently stubborn inflation and geopolitical uncertainty will continue to weigh on overvalued equity markets.
“If you look at gold in relation to equities, then you're looking at one of its most important protective attributes. Over time, gold has historically offered protection against downturns in equities, whether you go back to Black Monday in 1987, the bursting of the dot-com bubble in 2000, the global financial crisis in 2008, or COVID in 2020. I could go on, but you get the picture. During all of those occasions, equities plummeted, and gold surged,” he said. “Gold’s ability to shield against a potential decline in equities is very strong right now, and that's at the forefront of my mind given the volatility we’re seeing.”
At the same time, Milling-Stanley expects gold to perform well as inflationary pressures continue to grow. He pointed out that, following the Federal Reserve’s monetary policy meeting on Wednesday, the central bank clearly remains focused on inflation.
“With all the things Powell said Wednesday, it was what he didn’t say that intrigued me more. In December, the central bank’s statement said ‘inflation has made progress toward the committee's 2% target.’ This time, it did not,” he said. “There is concern that some of the incoming administration's policies may prove inflationary, whether it’s immigration policies that could push wages higher or tariffs, which are ultimately paid by American consumers.”
Milling-Stanley noted that rising inflationary pressures will weigh on real yields, which should, in turn, weaken the U.S. dollar — removing a major headwind for gold.
He concluded by emphasizing that gold is performing exactly as expected as 2025 gets underway.
“We spent seven or eight years trying to break through the $2,000 overhead resistance level. We finally achieved that milestone last February, less than 12 months ago. Not only are we now comfortably above $2,000 an ounce, but prices are $700 to $800 higher than that previous resistance level. That’s how gold has historically behaved when it surpasses a long-standing resistance zone,” he said. “Gold is off to the races. It’s doing exactly what we expect it to do. I see nothing but green lights ahead for gold.”
