Putting gold’s lackluster performance into perspective

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(Kitco News) – The gold The market saw another lackluster performance this week as price hit a brick wall at $1,900 an ounce. Selling pressure came as the US dollar continued to trade near its 20-year high, benefiting from the Federal Reserve’s aggressive plans to raise interest rates.

Despite gold’s disappointing performance, many analysts noted that the market remains reasonably healthy and is consolidating after a strong performance in the first quarter. The precious metal has faced tough hurdles over the past two months as the Federal Reserve began signaling that it would raise interest rates by 50 basis points.

The US central bank responded to those expectations on Wednesday, raising the Fed Funds rate to between 0.75% and 1%. Although the Fed still expects to raise interest rates aggressively in the next two meetings, some analysts are beginning to see a limit to the central bank’s hawkish stance. Federal Reserve Chairman Jerome Powell even pushed back on expectations that the central bank could raise interest rates by 75 basis points in June..

Yes, interest rates will continue to rise throughout the summer, but markets expect a high of around 3%. Many analysts have noted that this is still a positive environment for gold, as high inflation will keep real interest rates relatively low.

Following the Fed’s decision, Kitco News had the opportunity to speak with George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors. He provided an interesting perspective on the current environment, saying gold will continue to perform well in an environment of low real interest rates as a key diversification tool.

“As I said before, gold has nothing to fear from a rise in interest rates. Stock markets, however, are a different story. They will have something to fear from a rise in interest rates. interest rate,” he said. “There are more threats to the likely course of the stock market right now than there is to the gold market,”

Turning to financial markets, the price of gold has fallen 3.5% since March 22, when Powell began signaling the central bank’s aggressive stance. During this same time, the S&P500 fell 9%. The broad stock index is down nearly 14% for the year, while gold is up 4%.

State Street isn’t alone in being bullish on gold. In an interview with Kitco’s Anna Golubova, Wells Fargo’s head of real assets strategy John LaForge said gold is still on track to break above $2,000 an ounce by the end of the year.

“We are in an environment where defensive assets should do well,” he said. “The value is there. We’re in the middle of a super cycle. I think this whole unloved gold stuff is going to change.”

Warning: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.

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