Although the yellow gold price is testing a significant level of support, markets are shaped by a possible change in the US Federal Reserve’s stance on monetary policy, according to a market strategist. This indicates that further decline in price may be limited. State Street Global Advisors chief gold strategist George Milling Stanley’s comments on the markets and gold…
Gold comments from the market expert: The last price action is positive in the series
As we reported , on Wednesday, the Federal Reserve signaled that it may release a plan to cut monthly bond purchases in November and begin the decline in December. At the same time, a change in interest rate projections, also known as dot charts, showed that the US central bank could raise interest rates by December 2022. Forecasts also show that interest rates could rise to 1% by the end of 2023.
State Street Global Advisors chief gold strategist George Milling Stanley said in an interview that he views the recent price action as positive after the Federal Reserve’s monetary policy announcement. Milling-Stanley pointed out that gold prices fell $100 in June, when the Federal Reserve signaled for the first time an interest rate hike on the horizon. Gold prices fell yellow after the last monetary policy meeting but are holding support around $1,750 an ounce. Milling Stanley uses the following expressions:
Price action gives me courage because perhaps markets are getting more comfortable with the Federal Reserve’s monetary policy. The gold market is more than just where interest rates go. Historically, the two promises gold makes in a portfolio is to improve your returns and reduce your risks. Right now, investors should focus on gold’s ability to reduce risk in your portfolio.
Facing global risk
A key factor working against gold has been the continued unprecedented rise in equity markets. Milling-Stanley said the S&P 500, the Dow Jones, hit record highs on an almost daily basis in 2020.
The rally in the stock markets comes as the global is faced with the upcoming risks. Some market analysts speculate that a possible default by Evergrande, a leading Chinese real estate developer, could spark a global liquidity crisis. The company’s debt is $300 billion. It will potentially have to pay around $1 billion in interest payments over the next three months. Meanwhile, US officials continue to raise the alarm that the government is running out of money to meet its obligations.
Milling-Stanley: Investors are risk-averse
“Investors are clearly in a risk-averse mood, but there is a lot of uncertainty to worry about,” Milling-Stanley said. “Equities are a series of risk assets. There is no doubt about it. And I think it’s good for investors to understand that. “The thought of people piling into risky assets like stocks at the current rate is a disturbing phenomenon,” he added. Milling-Stanley said that for anyone concerned about valuations in the stock markets, it is now time to diversify their assets and added:
You have to protect yourself when you’re fragile, and right now stocks are vulnerable. If you look at past financial crises, in some cases one of the primary reasons has been an underestimation of risk.