Despite a flurry of hawkish commentary from the Federal Reserve, Europe's leading asset manager, Aberdeen, asserts that many institutional investors are not buying into the aggressive narrative, viewing the current pullback as a technical clearing event rather than a deterioration in gold's underlying long-term fundamentals.
Gold prices have recently been fluctuating around $4,000 per ounce, but Robert Minter, Investment Strategy Director at Aberdeen, believes short-term volatility does not alter the long-term investment case for the precious metal.
In an interview with Kitco News, Minter stated that the recent retreat primarily reflects technical factors, not a worsening of gold's fundamental picture. Minter expressed:
"I don't think there's anything that has structurally impaired the gold market. I think it's a positive thing to get some of the long positions out."
He argues that the exit of speculative money actually leaves the market structure healthier, as the core sources of demand for gold remain intact.
Central Bank Purchases Underpin Gold's Long-Term Value
Minter stated that gold's importance within the global financial system is now greater than it was in past years. "Clearly, gold is now more structurally important than it has been," he said.
He pointed out that sustained gold buying by global central banks is a key factor supporting this trend. During the recent price adjustment, China's central bank added 15 tonnes to its gold reserves last month, aligning with Minter's previous assessment of official sector buying behavior.
"That's exactly what we told investors they would do," Minter noted.
In his view, some professional investors are not interpreting prices near $4,000 as a risk signal, but rather as an opportunity to increase their gold allocations.
"The way they look at $4,000 is: 'Is this the right level for me to add to my gold position?'" he explained.
Minter believes gold's role is evolving from a traditional inflation hedge to a more core monetary asset. With global government debt continuing to rise and central banks diversifying reserves, gold's appeal as an asset that is no one else's liability is further enhanced.
"I think the biggest risk in the market is currency risk. Gold is still the only currency that is not someone else's liability," Minter stated.
Fed Policy Expectations Influence Short-Term Gold Prices
Gold's recent performance has also been affected by expectations for U.S. monetary policy. On Monday, spot gold fell approximately 3%, marking its largest single-day drop in over a month. One contributing factor was rising oil prices to a one-month high due to ongoing conflict between the U.S. and Iran, bolstering expectations that the Fed might raise interest rates further. As gold yields no interest, rising rates typically enhance the appeal of interest-bearing assets, putting pressure on gold prices.
On Tuesday, gold prices rebounded after hitting a two-week low, as markets awaited U.S. inflation data and Federal Reserve Chair Jerome Powell's first congressional testimony of his new term.
Ilya Spivak, Head of Global Macro at Tastylive, said markets are currently in a holding pattern as investors face multiple risk events. "Markets are probably unwilling to make a decision. There's a lot of event risk in front of us, including Powell's testimony and the CPI print," he noted.
Federal Reserve Governor Christopher Waller stated on Monday that if upcoming data show inflation persistently above the 2% target, the Fed may need to raise rates in the "near term."
Market expectations for a September rate hike have also increased. The CME Group's FedWatch Tool shows traders now price in about a 76% probability of a September hike, up from 57% a week ago.
However, Minter believes the market is overly focused on Powell's hawkish tone without fully grasping the direction of policy adjustment. "Powell is the boy who cried wolf. He is not a hawk," Minter said.
He suggests that Powell's continued emphasis on price stability since taking the helm is about building anti-inflation credibility, but it does not necessarily mean the Fed will enact significantly tighter monetary policy.
Minter stated that Powell is recalibrating the Fed's policy framework and reducing reliance on traditional economic indicators, as these models struggle to fully capture the current environment, including slower population growth, labor market changes, and structural shifts in inflation pressures.
He pointed out that despite hearing tougher policy signals, many investment advisors and institutional investors do not believe the Fed is about to tighten aggressively. "I don't think anyone is really buying that hawkishness," Minter said.
Gold's Long-Term Trend Remains Intact
While gold faces short-term influences from rate expectations, dollar movements, and geopolitical risks, Minter argues investors should look beyond price adjustments to focus on shifts in the global financial system.
He stated that what truly warrants attention is the growth of global sovereign debt and risks to the monetary system, rather than any single inflation print or the next interest rate decision.
Minter believes that against a backdrop of persistent global debt pressures and continued central bank gold accumulation, gold's role as a long-term store of value will not change.
Regarding the current pullback, he views it as a market rebalancing, not a reversal of gold's long-term uptrend. For investors focused on longer cycles, there are no clear signs yet that the logic of the gold bull market has been broken.
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