Get Some Gold As Volatility Is Here To Stay - State Street Global Advisors
(Kitco News)- The days of holding on to equities and expectingdouble-digit returns are gone and one gold market analyst says that the recentcorrection in equities is a wakeup call that investors need to have a morediversified portfolio.
In an interview with Kitco News, George Milling-Stanley,head of gold strategy for State Street Global Advisors, said that volatility iscreeping back into equity markets and investors should expect that stockmarkets will continue to struggle as valuations remain over-stretched. He addedthat this will be a positive environment for gold as he expects that it could onlya matter of time before prices pushes above $1,400 an ounce.
Milling-Stanley said that gold’s attractiveness as aportfolio diversifier is growing as investors continue to digest the recent flashcrash, where the Dow Jones Industrial Average saw its biggest one-day pointdrop in its history.
“The factor for higher gold prices is not necessarilyweaker equity prices, but increased volatility in equities will be helpful forgold. The idea of rising volatility is going to be disturbing for someinvestors,” he said. “We have gold bubbling up against overhead resistanceagainst overhead resistance between $1,350 and $1,400. I still expect us tomake several more assaults at this level throughout the year.”
Gold Doesn’t HaveTo Worry About Rate Hikes and Higher Interest rates In 2018
While some analysts are worried that gold won’t be ableto withstand rising bond yields, Milling-Stanley said that he is not tooconcern about 10-year bond yields, which have recently hit fresh four-yearhighs.
Milling-Stanley explained that although bond yields arerising, inflation is also increasing; as a result, real yields remain low,making gold an attractive investment.
As for the Federal Reserve, Milling-Stanley said that heexpects gold prices to follow the similar pattern established in 2015. He looksfor gold to sell off ahead of the March monetary policy meeting and then rallydirectly after the announcement.
“The Federal Reserve raised interest rates three timeslast year and gold still did very well,” he said. “I don’t think gold willworry too much about another three rate hikes this year.”
Milling-Stanley noted that he is not expecting theFederal to get ahead of the inflation curve and would probably not raiseinterest rates more than three times this year, even if inflation pushes above2% in 2018.
“A rise of 2% will validate the Fed’s expectations thatinflation is moving up,” he said. “Inflation would have to move sharply higherto force the central bank to act more aggressively and nobody is expectingthat.”
While gold has attracted some renewed selling pressureafter last week saw the precious metal’s best percentage gains in nearly twoyears, Milling-Stanley said that he is not expecting to see a sharp selloff. Headded that gold has potential to push higher for a couple more weeks before itsees significant selling pressure as investors position themselves ahead of theMarch 20 Federal Reserve monetary policy decision.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com 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.