Since the Fed has made it apparent that economic turmoil is coming, now is not the time to sell your core gold assets, as gold prices will increase says one gold market specialist.

State Street Global Advisors’ senior gold strategist George Milling-Stanley recently told Kitco News that gold prices might continue to face headwinds so long as three parts of the American economy demonstrate resiliency even as the Federal Reserve continues its aggressive monetary policy stance.

Gold Market

The gold market is now being restrained by three factors: a relatively strong consumer demand, a relatively strong equities market, and solid increases in the U.S. dollar, which trades around its best level in more than two decades.

“The gold market is now in a position of weakness. It’s clear that gold’s future is cloudy at best unless these factors shift.

Milling-Stanley said that the selloff has been modest compared to the rallies observed over the last 13 years, even though the equities markets have been in a steady decline for much of the year, with the S&P in bear-market territory down 21%.

“Equity markets have been surging on cheap money since 2008, and free money since 2018, and they are down, but they have farther to go if Powell wants to get inflation down to 2%,” he added. “Until the stock market drops, Powell plans to keep boosting interest rates. As a result of increasing interest rates, investors may not feel the full impact for a while.”

Milling-Stanley argued that investors should keep their core gold holdings even though investment demand has been poor throughout much of 2022. This is due to the imminent economic downturn resulting from higher interest rates.

According to him, “inflation is still worryingly high,” and “Powell has made it quite plain that he is going to have to give some pain to the economy” to bring it down. “There is a lot of uncertainty in the macroeconomic and geopolitical spheres, so I wouldn’t sell my safe-haven investments now. Given the current market, I believe that most investors are trying to increase their initial stake.”

Milling-Stanley said that one reason the gold price has been able to keep crucial long-term support at approximately $1,675 is because of the possibility of an economic slowdown and recession. However, Milling-Stanley stated that he does not anticipate gold prices to go any lower, even if gold prices may struggle to surge upward through the end of the year.

“Weaker hands of speculators who expected gold prices would go back up through $2,000 are responsible for the recent selloff in the precious metal. We have purged many less reliable investors, leaving only those committed to long-term strategies. They won’t be going anywhere soon, “He said. The current global climate makes owning gold a prudent investment strategy.

After the Federal Reserve increased interest rates by 75 basis points on Wednesday, Milling-Stanley commented on gold. The Fed Funds rate is projected to reach its maximum of 4.6% in 2023, announced by the Central Bank with the massive rate increase.

Despite this, Milling-Stanley claims they may not place much stock in the most recent economic forecasts. He continued that the Federal Reserve will continue to raise interest rates until inflation is under control, adding that the Fed has not yet achieved “peak hawkishness.”

“The future trajectory of interest rates is unknown. It is appropriate for Powell to maintain a hawkish tone and reassure the market that he will take action against inflation and maintain his 2% objective. The market will believe him sometimes, and the trouble will really start.

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