Gold Price: We Haven't Seen The Highs For 2018 Yet - State Street
(Kitco News)- While thegold market appears to have entered a consolidation period, one analyst saysthat this is just the beginning of the rally this year.
In atelephone interview with Kitco News, George Milling-Stanley, head of goldinvestments at State Street Global Advisors, said because of the strongsentiment in the gold market, he thinks it is only a matter of time before goldbreaks above its recent four-month highs and retests the highs from 2016.
“I don’tthink we have seen the highs in gold for the year,” he said. “I think it is avery real possibility that gold pushes to $1,400 sometime during the year.”
Milling-Stanleysaid that he is not expecting gold to see any real correction until early Marchwhen the market will start to focus on potential interest rate hikes. TheFederal Reserve will meet next week -- its first monetary policy meeting of thenew year -- but markets are not pricing in a rate hike until March 21.
“The marketdoesn’t feel toppy right now. I think the seasonal factors that have beenbullish for gold can run for a couple more months,” he said.
Helping topush gold higher is a weaker U.S. dollar, which has fallen to fresh three-yearlows against a basket of global currencies. Milling-Stanley said that hedoesn’t expect this trend to change in 2018.
He addedthat the U.S. central bank will not be in a hurry to raise interest ratesrapidly this year, which will keep real interest rates low and keep pressure onthe U.S. dollar.
“I feelreally good about the gold market in 2018. But I have serious anxiety for theU.S. dollar,” he said.
Milling-Stanleysaid that he is also suspicious that the U.S. economy will see significant growthin 2018 despite the fact that the U.S. government has passed historic tax cutsto increase consumption.
Instead ofspurring growth, Milling-Stanley said that he expects companies to hoard theirnew found tax windfall and use it to buy back stocks, supporting anoverextended equity market.
“I haveserious concerns for supply-side economic policies and I don’t believe the taxcuts will generate enough growth,” he said. “Instead the tax cuts are going todrive up the deficit, which nobody seems to be talking about anymore.”
Whileequity markets could continue to push higher, Milling-Stanley said that he doesnot expect this will be much of a headwind for the gold market in 2018. Heexplained that gold will remain an attractive portfolio diversifier as more andmore investors take defensive positions to protect against a potential marketcorrection.
“We are inthe ninth-year of a bull market in equities and while I don’t know when it willend, I do know that it will end,” he said.
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.