A 50-year gold vet and co-creator of its largest ETF shared 2 strategies investors should be using now amid the rise to new highs — and told us why his ‘bull-case scenario’ hasn’t yet come to pass
- Gold has shot up to around $2,000 in recent weeks amid investor uncertainty about an economic recovery.
- According to State Street's George Milling-Stanley, the price of the precious metal still has a bit of room to run in 2020.
- Milling-Stanley shared with us 2 strategies to capitalize from the continued bull market.
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Gold crossed $2,000 an ounce for the first time last week, as demand for the precious metal spiked amid investor uncertainty about another stock market downturn.
While the price of gold has since dipped below $2,000, it still has a bit of room to run, according to George Milling-Stanley. He's the chief gold strategist at State Street Global Advisors and a co-founder of the SPDR Gold Trust, the first US ETF linked to the commodity.
In an Aug. 6 report, he listed his bull-case scenario price target range at $2,000-$2,200 an ounce through the rest of the year — a scenario he gave a 40% chance of occurring.
In a phone call with Business Insider Aug. 10, he said he remained bullish on gold and noted his estimates were on the conservative side.
"I'm definitely leaning to the optimistic side and I'm not expecting to see the bear-case come to pass," he said, referring to his bearish $1,700-$1,900 price target range, which he gave a 20% chance of occurring.
One reason for Milling-Stanley's optimism on gold is his skepticism that equities will continue on their upward trajectory. He said that they bounced too quickly, before investors could be sure of the full range of the economic implications of the pandemic. He added that he anticipates stock market turbulence in the near term.
Read More: BANK OF AMERICA: Buy these 5 commodities now for profits into next year as pandemic uncertainty boosts their prices and lifts gold to $3,000
He also said in his report that a weaker economic recovery in industrialized countries and a weakening dollar would incentive investors to stay in gold, with its "safe-haven" status. Moreover, a stronger economic recovery in emerging market nations would boost jewelry demand. The weaker dollar may also prompt emerging-market central banks to turn more toward gold.
Gold's downside, Milling-Stanley said, lies in a stronger economic recovery in industrialized nations as investors would feel less like they need its "safe-haven" status. Still, it will likely be protected from dropping below $1,700 as potential inflation from government stimulus could also drive investors to stay in gold, he said.
2 strategies to use now with gold near all-time highs
Milling-Stanley recommended two strategies investors might use to profit from an ongoing bull market in gold.
First, he suggested investors up the allocation of gold in their portfolios up to two times: instead of a recommended 2-10% of a portfolio — depending on an investor's risk tolerance and liquidity needs — it should now make up 2-20%.
"When I look at the current circumstances and I look at what I think is a clouded outlook for the equity market over the next 6 to 18 months, and a very clouded outlook for the bond market with interest rates at zero for the next year and a half at least, I think an allocation above [10%] might make sense," Milling-Stanley said.
And second, to gain more exposure to gold, he said investors' best bet is buying shares of a gold exchange-traded fund, as they allow investors access to fluctuations in the price of gold without having to pay a premium to own and then securely store gold bars or coins.
Milling-Stanley recommended two ETFs in particular, though it should be noted that both are products run by his firm, and that he helped create the first one: the SPDR Gold Trust (GLD); and the SPDR Gold MiniSharesSM Trust (GLDM). Other gold ETFs investors might look at include the GraniteShares Gold Trust (BAR) and the Perth Mint Physical Gold ETF (AAAU).
He also said that investors should take care not to equate the success of the price of gold with the performance of shares of gold mining companies, which behave as what they are: equities.
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