Gold Price Should Be At $1,500 By Year End - Incrementum AG
(Kitco News) - Gold investors are taking profits Tuesday, as the U.S. dollar found some traction, bouncing off fresh three year lows, but one fund manager says that gold will be the asset to own in 2018 as the risk of stagflation in the U.S. economy rise.
In a recent interview with Kitco News, Ronald-Peter Stoeferle, fund manager at Incrementum AG and author of the annual In Gold We Trust report, said he could see strong momentum pushing gold prices through $1,500 an ounce by the end of the year. The yellow metal will be supported by rising inflation, lower economic growth and a weaker U.S. dollar.
April gold futures last traded at $1,331 an ounce, down almost 2% on the day.
“I don’t know how far gold prices can rise. We are at the start of a new bull market and I see gold easily at $1,500 an ounce by the end of the year.”
Stoeferle said that gold remains an attractive asset as volatility rises, as the U.S. economy is late in its growth cycle. He added that expected infrastructure spending and the passage of historic tax cuts in the U.S. would drive inflation higher, without having a significant impact on gold.
“The U.S. and global economies are not as strong as people might think,” he said. “Surprise inflation around the world is going to be a major issue going forward. Economic growth will be sensitive to higher inflation.”
Stoeferle added that rising inflation would continue to help gold prices withstand higher bond yields. Tuesday saw U.S. 10-year bond yields at 2.9%, its highest level in four years. Stoeferle added that he doesn’t see yields rising much above 3% in 2018 as global demand, in a low rate environment, will see U.S. debt as an attractive investment.
However, he added that even the global market will have its limit for U.S. debt, which will keep the pressure on the U.S. dollar, adding further tailwinds for gold prices.
“The deficit right now is ridiculous. The government is spending so much money, and they aren’t in a recession yet. What is going to happen when the U.S. does fall into a recession,” he said. “I am expecting to see a weaker U.S. dollar.”