After six days of selling, gold prices rose for the second day on Tuesday, hitting a one-week high, returning above the $2,630 mark and approaching $2,640. As the dollar retreats from its recent highs, the gold market appears to be recovering.
"The sell-off has run out of steam, which is attracting potential buyers who have been waiting for the market to stabilize before entering the market," said Ole Hansen, head of commodity strategy at Saxo Bank. "A halt in the dollar's rise may be the necessary trigger."
The dollar retreated as investors booked profits after last week's strong gains that pushed the greenback to a one-year high. A weaker dollar makes gold cheaper for buyers holding other currencies.
Gold prices have fallen nearly 5% since Trump's election. However, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said in a recent interview that even in the current sell-off, the gold market is still in a solid uptrend and is still expected to achieve its bullish expectations by the end of the year.
Earlier this summer, Milling-Stanley raised his year-end bullish gold price forecast to between $2,500 and $2,700 an ounce. His base case scenario has gold trading between $2,200 and $2,500 an ounce.
“I’m a little shocked by the severity of the gold sell-off, but I don’t think it will last,” he said. “After being up 33% this year, I don’t think investors should be too concerned about this sell-off.”
Looking ahead, Milling-Stanley said he does not think Trump's potential policies will be as positive for the dollar as many believe. While Trump's proposed tariffs will support domestic production, higher inflationary pressures could slow economic activity.
While the Fed has begun a new easing cycle, Milling-Stanley said he does not expect Fed Chairman Jerome Powell to hesitate to raise interest rates if inflation rises again, which would slow economic growth.
Several Fed officials are scheduled to speak this week, which may provide more insight into the central bank's future path of rate cuts, with traders currently pricing in a 58% chance of a 25 basis point rate cut in December.
Milling-Stanley said gold was undaunted by shifts in U.S. monetary policy, noting that at the start of the year the market was expecting to see six rate cuts, and even as those expectations were pared back, gold had its best rally since 1979.
Meanwhile, Milling-Stanley said inflation is not the only factor supporting gold prices. He explained that Trump's proposed tax cuts are not only inflationary, but will also add to the government's already swollen debt. "If we see signs of inflation, I think gold will respond to that more than anything the Fed does to deal with inflation," he said. "Gold is very sensitive to inflation, and it's also very sensitive to debt and deficits."
Given all this uncertainty and the current easing cycle, Milling-Stanley said he still expects Western investors to continue to flow back into gold-backed ETFs. "I think a lot of people have been waiting for this pullback. As the Fed continues to lower interest rates and economic uncertainty remains high, gold remains attractive."
In addition, the escalation of the conflict between Russia and Ukraine also pushed up gold prices. Russia launched its largest airstrike on Ukraine in nearly three months last Sunday. According to RIA Novosti, the Russian Ministry of Defense said on Tuesday that Ukraine used US Army Tactical Missile System (ATACMS) missiles to attack Russia.
Article forwarded from: Jinshi Data
