Gold prices have fallen to a four-month low as Federal Reserve Chair Jerome Powell has struck a hawkish tone during his two-day semiannual testimony before Congress. However, looking at the broader landscape, one market strategist said that despite the difficult headwinds, gold continues to show relative strength as U. S. monetary policy is only one small aspect driving the gold market.
Resilience at Critical Support Levels
In a recent interview with Kitco News, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said that if the gold market can continue to hold critical support at around $1,900 an ounce, there is a good chance prices can end the year higher.
Long-term Protection of Gold
Instead of looking at short-term opportunity costs of holding gold in a rising interest rate environment, Milling-Stanley said that investors should look at how gold can provide long-term protection and enhanced risk-adjusted returns.
Impact of Hawkish Fed on Equity Markets
While gold could continue to struggle in the near term as the Federal Reserve maintains its aggressive monetary policy, George Milling-Stanley said that investors should also consider the impact this will have on equity markets and the growing inflation threat.
Support from Jewelry Demand and Central Banks
Milling-Stanley added that growing jewelry demand in China and India will also be another pillar of support for gold through the rest of the year. Adding to the support in the gold market is the fact that central banks continue to buy gold at a record pace.
Rebalancing Act for Investors
As for investment demand, Milling-Stanley said that he expects this segment of the market to pick up as investors take advantage of lower prices.
