By Aparna Narayanan
This year, gold has done exactly what it is expected to do when the stock markets are in turmoil: offer a safe haven. ETF investors saw proof of that again after Brexiteers' triumph drove stocks down and the precious metal to a new high.
And Brexit isn't yet done having an impact on gold, says George Milling-Stanley, head of gold investment strategy at State Street Global Advisors. He describes the U.K.'s vote to leave the European Union as "a result without a resolution" that's leading to enormous uncertainties.
A messy divorce should be supportive of the precious metal going forward. Brexit also boxes in the Federal Reserve, which is now widely expected to put off interest-rate hikes that could have weighed on the yellow metal.
So another gold rally may be coming. But what's that rally going to look like?
That matters to gold bugs. Milling-Stanley likes to see a sustainable rise in gold prices. He's heartened that gold continues to trade within his predicted $1,150-$1,350 per ounce range, but at the top end Of it. So far, he's seeing no signs of a bubble in gold prices reminiscent of 2011.
"It makes me happy and optimistic," he told Investor's Business Daily in a phone call.
How High Can Gold Go?
Milling-Stanley's short-term outlook for gold prices is bullish. It wouldn't surprise him to see gold hit $1,400 by Christmas, he said.
SPDR Gold Shares (GLD), the largest commodity exchange traded fund, hit its highest level in nearly two years after the Brexit outcome. GLD jumped 9% in June and has posted a lofty 25% gain year to date.
Still, the ETF is trading roughly one-third off its all-time peak of 185.85. It's returned only about an average annual 2% the last three years. That leaves room for potential upside, experts say.
GLD has seen $14.82 billion in net inflow so far in 2016, topping every other ETF.
Milling-Stanley said a good deal of recent gold purchasing has been for strategic allocations, which "had dwindled to dangerous levels after the bursting the 2011 bubble." Gold acts as a risk diversifier in portfolios made up of mostly stocks and bonds, among other benefits. It tends to deliver a return when other assets fail, according to the World Gold Council.