Gold is near fair value, setting the stage for the next leg higher - WisdomTree's Shah

After a wild start to the year, gold's sharp correction has brought prices back toward fair value rather than signaling the end of the precious metal's secular bull market, according to one market strategist. In an interview with Kitco News, Nitesh Shah, Head of Commodities and Macroeconomic Research at WisdomTree, said he sees an opportunity for gold to recover this year, as investors have become too aggressive in pricing in future Federal Reserve rate hikes following the central bank's hawkish guidance at its June monetary policy meeting. "I think the market's gotten a little bit ahead of itself," Shah said, referring to expectations for tighter monetary policy. Shah said investors are placing too much weight on policymakers' projections while overlooking the broader economic constraints facing the central bank. "I don't think I'm fully convinced we're going to get that many hikes that soon," he said. "Yes, the labor market's strong-ish and inflation's high, but the narrative isn't that different." Shah pointed out that if the Federal Reserve aggressively reduces the size of its balance sheet, that tightening would reduce the need for multiple interest rate increases. "I think that's going to be monetary tightening in and of itself, and that will give less bandwidth for the hikes," he said. He also questioned whether policymakers can realistically maintain a prolonged hawkish stance given the government's mounting debt burden. "Getting hawkish just means the interest payment bill goes significantly higher," he said. "At some point, if you hike, you will be forced to cut them straight after because you've engineered your own recessionary-type scenario or a disruptive unraveling of the financial system." Rather than seeing the recent decline as the start of a prolonged bear market, Shah described the correction as a healthy normalization after speculative excess pushed prices well b...