President Donald Trump isn’t the only factor contributing to market jitters.
Gold’s getting ready for a breakout above $1,300 an ounce and it’s not just because of investor jitters tied to President Donald Trump.
“The Trump presidency is one element contributing to the generally nervous atmosphere as far as geopolitics are concerned—an important element, but not the whole picture,” said George Milling-Stanley, head of gold investment strategy at State Street Global Advisors.
Futures prices for gold are about 12% higher year to date, building on an 8.6% climb last year. On Thursday, December gold rose 0.7% to settle at $1,292.40 an ounce.
But despite gold’s strength, it hasn’t managed to settle above $1,300 since early October of last year.
“Today’s markets are not reflecting any significant increase in investor perceptions of risk over last April,” said Milling-Stanley.
Gold has generally been trading in a range between about $1,150 and $1,350 since the spring of 2013, with occasional moves outside of that range which weren’t sustained.
To be sure, there have been day-to-day fluctuations in the price that may be attributable to something President Trump said or did, “but so far nothing has driven gold out of its trading range for longer than a short time,” he said.
Still, Milling-Stanley stands by his previous expectations for gold to top $1,300 by the end of this year or early next year. He also reiterated his forecast that prices may even trade between $1,350 and $1,400.
He said he’s even more convinced now of his outlook as “investor expectations for further interest-rate increases in calendar 2017 continue to diminish.”
And there’s so much more to the “very nervous environment within which financial markets, including gold, are currently operating,” said Milling-Stanley.
“Other important elements include Russian President “Vladimir Putin’s territorial ambitions, the increasing belligerence of North Korea, the deteriorating relationship with Iran, significant differences of opinion with many traditional allies of the U.S., the fact that American troops are at risk in Afghanistan and Iraq, the intractable problems of the Middle East—including but not limited to ISIS and al Qaeda, Syria, and the worsening situation between Israelis and Palestinians,” he said.
Added to all of that are continued uncertainties in Europe, with “Brexit being just one of the problems that needs to be addressed immediately,” Milling-Stanley said.
“It is the combination of all these factors that is supportive of safe-haven buying of gold,” he said.
There may even be a chance that gold will eclipse the highs of 2011—when prices which touched record intraday levels above $1,900 an ounce.
“There is always the possibility of a repeat of the inflows of speculative money that drove prices up $500 in just nine months in 2011,” said Milling-Stanley. “When that happens, it would be possible to see prices approach the highs of 2011, and perhaps even surpass them.”
Nexus Gold - Profile August 2017