The Gold Market Poised to Reignite as Physical Demand Increases

The gold market is holding steady around $1,950 an ounce and is in a favorable position to reignite its bullish uptrend, according to George Milling-Stanley, chief gold strategist at State Street Global Advisors. Milling-Stanley expects gold activity to pick up in the coming weeks as consumers return to the physical market ahead of important holidays and festivals in India and other emerging markets.

One event to watch is India’s festival of light, Diwali, in November, where gold jewelry and bullion are traditionally purchased and given as gifts. This is followed by the start of India’s wedding season, another period of solid consumer gold demand. Additionally, if Chinese stimulus measures can support their economy, Milling-Stanley anticipates healthy physical demand from Asia.

While gold prices have lacked direction, Milling-Stanley believes that consumer demand could play a critical role in pushing the price back to $2,000 an ounce by the end of the year. He emphasizes the importance of momentum, especially from a significant rebound in jewelry and consumer demand.

Milling-Stanley is not concerned about 10-year bond yields, stating that they are not providing much momentum for the U.S. dollar. Even if the Federal Reserve raises interest rates in September and November, Milling-Stanley does not see it as a real threat to gold due to small moves of 25 basis points lacking momentum for the U.S. dollar. He suggests that interest rates could potentially work against the U.S. dollar and push the economy closer to a recession.

Despite the Federal Reserve’s optimism in bringing inflation down to 2%, Milling-Stanley highlights significant market risks. Federal Reserve Chair Powell acknowledges these risks as the central bank navigates through uncertain economic conditions. The ongoing anxiety trade has contributed to gold remaining strong, and Milling-Stanley believes the market is well positioned for a rally in the coming months.

Sources:
– Kitco News