Gold prices are poised for potential gains in the coming months, although reaching $3,000 an ounce by year-end is deemed improbable, according to George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors.
On Wednesday, the Fed cut interest rates by 50 basis points, lowering the Fed Funds rate to a range of 4.75% to 5.00%, and indicated plans for two more cuts this year, along with a projected total reduction of 100 basis points by 2025.
Milling-Stanley believes this monetary easing will bolster his overall gold price projections. He recently revised his forecast, anticipating gold to trade between $2,200 and $2,500 an ounce as a baseline, with a more optimistic scenario placing it between $2,500 and $2,700.
“I think those on Wall Street predicting gold will reach $3,000 by year-end are being overly ambitious,” he remarked, noting that such a milestone seems unlikely in the next three to four months. However, he sees a path to $3,000 in the following year, contingent on interest rate trends remaining stable.
Milling-Stanley is optimistic about gold’s potential to reach $2,700 by year-end, driven by a sustained cycle of rate cuts that could weaken the dollar. “If my predictions about the dollar hold true, gold could continue to strengthen,” he stated.
Despite this bullish outlook, he currently adopts a neutral stance on gold, considering it to be trading near fair value. At the time of writing, spot gold was priced at $2,589.70 an ounce, reflecting an increase of over 1% for the day.
Initially, the market reacted to the Fed’s aggressive rate cut with enthusiasm, but this sentiment was moderated by comments from Fed Chair Jerome Powell. “There is nothing in the SEP that suggests the committee is in a rush,” Powell emphasized during his press conference, highlighting a gradual approach to policy changes.
Milling-Stanley agreed with Powell’s assessment, arguing that the 50-basis-point cut was appropriate given market conditions. He pointed out that a smaller 25-basis-point cut would have created unnecessary volatility in equity markets.
“Even if we see a couple more 25-basis-point cuts as suggested by the dot plot, interest rates will remain quite high,” he noted. “Powell still has significant work ahead to bring rates down to his desired target.”
