Investors are buying that the Federal Reserve will continue its restrictive monetary policy for longer than expected. That’s why the gold market continues to see significant selling pressure. However, according to one strategist, all is not lost for gold!
$2,400 is definitely not the highest level for gold!
cryptokoin.comAs you follow from , the gold market lost the critical support at $2.3a00. The first day of the Federal Reserve’s monetary policy meeting saw a drop of more than 2%. The shiny metal broke a record three weeks ago, climbing above $2,448. However, it later lost about 6% of its value. The selling pressure comes as markets price in possible interest rate cuts in June and July.
However, Abrdn ETF Strategy Director Robert Minter says gold’s bull rally is not over yet. Minter paints a picture of a world turning to gold as a safeguard against fiscal imprudence and political volatility, and maintains a bullish outlook for the precious metal in the face of increasing global uncertainties. The strategist said, “Gold is just getting started. “$2,400 is definitely not the highest level for gold.” says.
Gold will play its role as the cornerstone of stability!
Robert Minter describes the recent price movement of gold as short-term volatility. He points out that the negative correlation between precious metals and bond yields has been broken for about two years. In this context, the strategist makes the following assessment:
The current gold price rally is driven not by interest rates but by a broader set of macroeconomic and geopolitical factors. The expansion of the BRICS coalition last August is evidence of the changing global economic landscape and is impacting gold markets as countries seek stability in increasingly higher gold reserves. As long as geopolitical tensions persist and economic policies continue to create uncertainty, gold will play its role as a cornerstone of stability.
At some point, the bond market vigilantes will return!
Geopolitical uncertainty increased the safe haven demand for gold. However, it didn’t stop there. Minter also points out that foreign investments are drawing away from the US dollar. The strategist predicts bond yields will continue to rise in this environment.
High bond yields have traditionally been a headwind for gold. However, Minter says investors need to understand why yields are rising. After all, they are not going up because there is too much optimism about the health of the US economy! Minter notes that bond yields are rising as investors demand higher rewards for increased risks. In this regard, Minter shares the following comment:
At some point, the bond market vigilantes will return. Because government spending is out of control. Interest expenses on the US government debt are greater than US defense spending. There is an alternative to holding US Treasury bonds, and that is holding gold. General investors don’t see this yet, but they will at some point.
It’s only a matter of time before investors return!
Robert Minter also says the U.S. will continue to see higher yields at a time when consumers can least afford them. He states that rising prices and high borrowing costs squeeze consumers. He also makes the following statement on this subject:
Inflation is not just a number on a page, it significantly reduces consumers’ purchasing power. Just look at the rising costs of living, from auto insurance premiums up 30% this year to home insurance up 15%. These are not abstract numbers, but facts that hit American wallets hard.
In this environment, Minter says, it is only a matter of time before investors return to the gold market to protect their wealth and purchasing power. He adds that renewed ETF demand will trigger a new uptick in gold’s rally this year.
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