According to one gold strategist, the precious metal still has nothing to be afraid of from the Federal Reserve, even after the central bank raised interest rates by 50 basis points and signalled further aggressive action at the next two meetings.George Milling-Stanley, chief gold strategist at State Street Global Advisors, believes gold prices will continue to trade in a range of $1,800 to $2,000 an ounce for the rest of the year, even as the Federal Reserve continues to fight inflation with aggressive tight monetary policy.
Although the US central bank has signalled that it could raise interest rates by 50 basis points at its next two meetings, Federal Reserve Chairman Jerome Powell rejected the idea that it could raise interest rates by 75 basis points.
The market had to adjust some of its hawkish expectations, which helped gold prices rise briefly above $1,900 an ounce.
Milling-Stanley said that the gold market remained stable. The precious metal is being helped in the new tightening cycle by rising volatility in stock markets.As well as rising interest rates, Milling-Stanley also noted that growing economic threats in China and Europe and continuing geopolitical uncertainty would help gold maintain its safe haven attractiveness.Another important reason why gold should not fear the hawkish stance of the Federal Reserve is that real interest rates will remain low until the end of 2022.Markets expect interest rates to rise to 3% by the end of the year. According to Milling-Stanley, this is reasonable given the current economic situation. However, he adds that inflation will keep real interest rates low.
