(Kitco News) - Gold prices continue to consolidate around $2,900 an ounce, but the precious metal has plenty of upside potential as investor demand continues to pick up, according to one market strategist.
In an interview with Kitco News, George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors (SSGA), said that although interest in gold-backed exchange-traded funds (ETFs) has lagged in the current bull market, sentiment is quickly starting to shift as investors see new potential in the precious metal.
February was an unprecedented month for the gold ETF market as North American investors flooded into the marketplace. According to data from the World Gold Council, 72.2 tonnes of gold—valued at $6.8 billion—flowed into North American ETFs last month, the largest single-month inflow for the region since July 2020 and the strongest February on record.
Milling-Stanley said that with growing economic uncertainty and geopolitical chaos, investors are turning to gold as a safe haven and inflation hedge. Specifically, the bulk of investment capital has flowed into the SPDR Gold Shares (NYSE: GLD), the world’s biggest gold-backed ETF. State Street is the sponsor and manager of GLD.
Data from GLD shows that more than 20 tonnes of gold flowed into the ETF on Feb. 21, its biggest one-day increase in over three years. GLD holdings have increased by nearly 22 tonnes this year. Milling-Stanley said the inflows were valued at $1.9 billion.
Although GLD has seen a solid rise in its holdings, Milling-Stanley said there is still plenty of room for investment demand to grow. GLD’s gold holdings currently stand at 894 tonnes, down 33% from their all-time highs in December 2012. GLD holdings are down 30% from October 2020, the peak of the previous bull market.
Milling-Stanley said that he expects investment demand to continue to grow as the gold market has three significant drivers supporting the rally.
He pointed out that central bank gold purchases have been a paradigm shift in the global marketplace. Central banks have bought more than 1,000 tonnes of gold in each of the last three years as they have diversified away from the U.S. dollar.
Milling-Stanley added that a sharp rise in economic uncertainty and the growing threat of a recession will make gold an attractive safe-haven asset. At the same time, persistent physical demand in Asia supports higher prices.
“ETF investors have been a little late to the party, but I am glad to see that they have finally joined,” said Milling-Stanley. “ I think there's a very good likelihood that we will see investment demand continue to grow. The reasons behind gold’s rally are not going away; they're just getting stronger by the day.”
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.
“ We are seeing a lot of uncertainty, and the one thing I can say with complete confidence is that gold has always thrived on uncertainty,” he said.
