By Bilal Hafeez 10-09-2019

Gold’s Rise has Just Begun (Macro Voices, 87 min listen)

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(You can listen to the podcast by clicking here)

Strategy advisor to Vulpes Investment Management Grant William argues that outlook for gold is still bullish despite the recent rally of 30% in recent months. One bull signal they find quite intriguing was that despite dollar index gaining momentum, gold still held up well. Historically, dollar and gold both rising together has only happened amidst the aftermath of recession or financial crisis. William predicts that 10 Year US treasury may yield 1% going forward and globally negative-yielding debt may pile up more. As a result, opportunity cost (the cost of the next best alternative) decreases. They are therefore seeing increased preference for gold, which includes high profile investors like Ray Dalio and Paul Tudor Jones. He also considers whether Modern Monetary Theory (MMT), if directed towards real economy (Equity and Real Estate), could be more effective rather than when solely projected towards the bond market, which they believe has created a bubble.

Why does this matter? According to William, allocating gold relative to currency in a portfolio makes sense in the current environment. Similarly, just like any currency, gold is a liquid asset and it doesn’t have a counterparty risk associated with it. An equity-only portfolio can gain exposure through mining sector ETF as well. Based on their view, the recent rally in gold is just the beginning of a huge upside in gold, and they recommend accumulation of gold on dips.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)

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