Gold’s Disappointing Start to the Year
Gold’s significant December momentum waned last month as the precious metal saw a disappointing start to the year. January is normally a strong month for gold, with average monthly gains of over 3% in the past decade. However, last month, the market experienced a decline of 0.2%. Gold prices have been consolidating in a range, struggling to hold consistent gains above $2,050 an ounce.
Support Above $2,000 an Ounce
In spite of these challenges, George Milling-Stanley, chief gold strategist at State Street Global Advisors, believes that gold remains well-positioned. He points out that gold has managed to hold critical support above $2,000 an ounce, even as the Federal Reserve has tempered expectations of aggressive easing this year. While the central bank has laid the groundwork for eventual rate cuts, the cycle is not expected to begin in March, and the number of cuts may be fewer than what the markets have priced in.
Milling-Stanley also expresses concern about the exuberance of equity markets, particularly with the S&P 500 hitting record highs. He believes that a stock market pullback is inevitable, and gold will benefit from it. He states, “Gold is in a very good position here. I’m very happy that gold has managed to stay above the $2,000 an ounce level.”
Solid Support from Central Banks and OTC Markets
Despite the struggle for momentum, Milling-Stanley emphasizes that the gold market is still well-supported. He references data from the World Gold Council, highlighting the demand from central banks and solid physical demand in over-the-counter (OTC) markets. This demand has helped keep gold prices above $1,900 an ounce. He notes that although some investors have traded away from ETFs and into the OTC markets, the demand for gold remains strong and is expected to grow as investors become aware of the current financial landscape.
Investors Should Focus on Momentum and Upside Potential
Milling-Stanley urges investors to focus on gold’s momentum and upside potential rather than its struggles. Despite the factors that could bring gold prices down, the metal has held steady at a high level, indicating its resilience. He believes that there are numerous reasons why gold is strong and will continue to strengthen.
Instead of waiting for a pullback, Milling-Stanley suggests that investors seize the opportunity to include gold in their portfolios. He warns that there is always the risk of missing out if they wait too long. In his words, “There’s a whole bunch of reasons why I think gold is strong, and why I think it’s going to get stronger.”