Nervous investors have flocked to gold as a safe haven against inflation, geopolitics, and, most recently, tariff turmoil, and they have been well-paid for their move this year. Now, those same investors are anxious about whether the precious metal’s run can continue.
Gold is up nearly 30% this year, after gaining more than 25% in 2024; it’s up 44% over the last 12 months.
The three-year annualized average return on gold, as measured by SPDR Gold Shares (GLD) , is 21.4%, well above its historic averages; from 1971 to 2024, the annualized return on the shiny stuff was just under 8%.
Great runs like this don’t last forever, so fearing a regression to the mean is normal.
Calm the nerves; one of the world’s leading gold strategists says record price levels will be broken regularly through the end of the year.
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George Milling-Stanley, chief gold strategist for State Street Global Advisors, said in a recent interview on “Money Life with Chuck Jaffe” that gold will continue to make sense for investors for its attributes and potential.
“We still have a lot of geopolitical turbulence, and gold historically has tended to perform well during periods of geopolitical turmoil,” said Milling-Stanley.
Milling-Stanley has spent some five decades overseeing gold’s fit into investment portfolios and helped develop GLD, the world’s first gold-backed ETF. Clearly, he knows a thing or two about the yellow metal.
“We still don’t know where we stand with interest rates. … We don’t know what the outcome of that is going to be. We still have an enormous amount of uncertainty on the macroeconomic front, as well as geopolitical shock.
“When faced with uncertainty,” Milling-Stanley added, “I’ve always turned to gold in the past and I think it’s served me well.”
George Milling-Stanley, chief gold strategist for State Street Global Advisors, has unveiled a new gold price target.
Image source: Costaseca/Lucas/AFP via Getty Images
Gold doesn’t glitter as an inflation hedge
Gold’s run-up over the last few years has coincided with higher inflation, but that hasn’t fueled the run, according to Milling-Stanley. He says it only serves the role of an inflation hedge when the economy is “suffering sustained high inflation,” which he defines as two or more years when prices rise persistently by 5% or more.
That hasn’t happened since the 1970s, so even if price hikes continue at their current pace—higher than the Fed’s 2% target—gold isn’t likely to respond to inflation.
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It’s the uncertainty that Milling-Stanley says gives gold more upside potential than downside risk.
“The higher the uncertainty, the higher the upper limit,” he explained, noting that emerging tariff policies and the pall they’ve cast on global markets have forced the team at State Street to revise forecasts made last December, intended to last the whole of 2025, several times already.
“I guess the most important thing to say is it looks very much as if we’ve established a new floor in the gold price, somewhere above $3,000 an ounce,” Milling-Stanley explained. “The floor last year was at $2,000 an ounce. That is a huge leap.
With a new floor in place—gold didn’t sustain a breach of the $2,000 level until February 2024 but has been higher ever since—and with the huge gains in the last 12 months, Milling-Stanley said he would not be surprised or even disappointed if gold consolidated a bit, trading in the $3,000 to $3,500 range for a while, simply holding value if market turmoil causes other asset values to drop.
But, he noted, “our bullish case suggests that we could actually take out whatever resistance is available at the $3,500 area, and possibly even trade as high as $3,900.”
By that best-case forecast, gold would gain more than 15% from current levels, on top of its huge gains of the last two years.
More reasons to buy gold now
While price performance has been glitzy, Milling-Stanley noted that a gold allocation makes sense in most portfolios for its non-glamorous, protective attributes:
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Diversification, thanks to “a zero relationship” to the movement of both stocks and bonds.Protection from stock market calamity. Milling-Stanley isn’t predicting disaster, but said that macroeconomic uncertainties make it impossible to eliminate the potential for something catastrophic.
“If you look at, Black Monday in 1987, if you look at the bursting of the dot.com bubble in 2001-2002, you look at the global financial crisis of 2008, you look at the advent of Covid in 2020, equities took a significant downturn and gold performed very, very well,” Milling-Stanley said.
Milling-Stanley notes that gold’s momentum hasn’t carried over to gold miners; he favors owning the physical metal, particularly because of concerns about market swings. Miners historically have sharply underperformed metals in big downdrafts.
Gold typically holds up against weakness in the dollar. The value of the dollar is off roughly 9% this year, and it lost about 4.5% in the wake of the Liberation Day tariff announcements.Inflation protection in the unlikely event that tariff policies hit home harder and longer than anticipated with the Fed losing control on price hikes.
“I think people are still looking to gold for its protective attributes, rather than necessarily hoping that the price will go up so they can sell at a profit tomorrow or next week,” Milling-Stanley said.
Still, he acknowledged that those timeless attributes shine brighter when attached to gold’s enhanced profit potential now.
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