Opinion with Peter Hug
Peter Hug: when gold goes above $1550, investors will rush in for the next leg higher
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Peter feels that a slowdown is coming but that there won’t be an official recession in 2020, perhaps 2021. The overall equity markets will likely be flat next year because of the Fed’s actions in keeping up the markets.
There was a lot of physical off-take of gold and silver by North American investors between 2008 and 2011. The price of gold will need to get higher than $1550 to attract retail investors back to the physical sector.
Peter has never subscribed to the manipulation theory for gold, and he has a long history with these markets. He says, “For every short position someone has to be long, and gold will always find it’s fundamental value depending on the political and economic factors at the time.”
He started in the business as a foreign exchange trader for a bank and shortly afterward transitioned into a metals trading position. It was an incredible time to be in the market back when silver went to fifty, and gold reached eight hundred. Interest rates were reaching 16%, and investors were lined up around the block to acquire precious metals.
Junior mining shares to him are extremely risky, and he prefers investing in large producers with existing cash flow. He says, “If you are bullish in the metals, consider the royalty companies instead of the producers.”
He points out that copper has done well along with rhodium and palladium this year. For Peter, gold is just another commodity, and there are other metals to watch that, at times, have better risk-reward ratios than gold. He hopes that gold never rapidly hits twenty thousand an ounce because that will be a disaster for other asset classes.
Time Stamp References:
0:40 – Recession potential and the Fed.
1:40 – Retail demand for gold and silver.
3:40 – Thoughts on the gold market.
5:40 – Managing your gold portfolio.
7:40 – His early career highlights.
10:30 – His preferred way to play this market.
12:30 – Watching the overall macro picture.
Talking Points From This Week’s Episode
• A slowdown is coming but may still be a ways off.
• Gold needs to break $1550 to attract retail investors.
• Why he recommends producers and the royalty companies.
• His approach to gold and why other metals also have potential.
Peter Hug is Director, Global Trading at Kitco Metals. Peter has been involved in precious metals since 1974, having gained first-hand investment industry experience at Deak-Perera. He served as SVP at Guardian Trust Company, which became one of the largest international trading houses for precious metals. He developed the first precious metals certificate program, and early margin trading accounts for metals on the cash market. Peter has acquired extensive experience in the wholesale markets and international asset diversification. A frequent speaker at precious metals conferences and in the financial media, he is one of a handful of experts who have succeeded through multiple bull and bear cycles on the strength and skills honed during the dramatic fluctuations of the 1980s. As the Director of Kitco’s Precious Metals Division, Peter develops newer and better investment options for Kitco customers.