GMP Securities: Fed Rate Hike Won't Hurt Gold Price

Mineweb reported that despite the recent weakness in the gold price, GMP Securities remains bullish on the metal. The firm’s Stephen Harris argued in a recent note that the US Federal Reserve’s anticipated interest rate hike “won’t hammer down the price of gold.”
As quoted in the market news:

Taking more or less the opposite view of Goldman Sachs – the most high-profile of gold bears – Harris outlined a view framed around slow rate hiking that will keep real rates negative.
To be sure, Harris acknowledges a negative correlation between US T-Bill rates and gold prices. “Our analysis suggests that real US T-bill rates above 2% are unambiguously bearish, but when rates are below this level, gold prices typically rise at a 15.2% annualized rate.”
But he doubts real rates will break above 2 percent for some time and in this sees rate hiking as a catalyst for higher, not lower, gold prices.
“Our thesis on gold is the same as our thesis on the overall stock market – that the run up to the first rate hike will be a challenging environment. However, with the initial Fed rate hike should come increased visibility on the pace of future rate hikes. We believe this will be bullish for gold.”

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