Gold Price is Primed to Top $3000, Says Fund
Can Gold Price Top $3000?
Gold price is primed to surge to fresh highs as the risks around central banks unwinding massive stimulus are under-appreciated by investors, said a fund manager who forecast the metal’s ascent to a record last year.
Diego Parrilla, who manages the $250 million Quadriga Igneo fund, said there isn’t widespread awareness of the long-term damage that’s been caused by ultra-loose monetary and fiscal policies. Artificially low interest rates have created asset bubbles that are too big to burst, which will make it very difficult for central banks to normalize without risking their collapse, he said.
“The tapering process will be glacial in terms of speed,” said the Madrid-based Parrilla, who correctly predicted in 2016 that gold would climb to a record within five years. “I think the drivers for gold strength, not only remain but actually have been strengthened.”
The fund manager said he’s sticking to his view that gold could rise to $3,000 to $5,000 an ounce in the next three to five years. The haven asset, which reached an all-time high of $2,075.47 in August 2020 as the pandemic wreaked havoc on the global economy, has traded near $1,800 over the last few weeks.
Gold took a tumble after the Fed’s hawkish shift in June, when officials sped up their timetable for policy tightening and said they would start discussing scaling back bond buying. Treasuries have been rallying since the end of March even as inflation accelerates, pushing 10-year real yields to a record low. That would typically raise the appeal of holding non-interest bearing bullion, but prices are still well below last year’s high.
Gold is disconnected from some of the moves in Treasuries and real yields, but could get a boost from a major risk-off event that would make it clear that central banks aren’t in control as much as people think, said Parrilla, who has worked at Goldman Sachs Group Inc. and Bank of America Merrill Lynch and has 25 year’s experience trading precious metals.
Higher readings of inflation set to be a “boon” for gold
Gold could test new highs again this year, according to David Lennox of Fat Prophets, who said he sees “a fairly big tick” ahead for prices of the precious metal.
“Inflation’s coming back because we’ve seen such a significant surge in U.S. money supply,” he explained. “Whenever we’ve seen that surge in the past, it’s been accompanied — probably five of six months later — by higher inflation.”
