I Advise Central Banks, And I Tell Them To Buy Gold: ProfessorBy Sarah Benali of Kitco News
Wednesday February 01, 2017 08:48
(Kitco News) - Gold prices continue to benefit as investors seek safe-haven assets, and although one professor is not a ‘wild bull’ on the metal, he remains fairly optimistic.
Steve Hanke, professor of Applied Economics at the Johns Hopkins University
“If I was advising a central bank, which I do, the recommendation is buy,” Steve Hanke, professor of Applied Economics at the Johns Hopkins University and a known trader, told Kitco News in a phone conversation Tuesday.
“Uncertainty in general…and all kinds of things going on [right now] are favorable to gold.”
Gold prices have rallied this week as markets await more central bank policy announcements, with the metal holding above $1,200 an ounce. April Comex gold futures last traded at $1,208 an ounce, down 0.28% on the day.
“I do think gold is relatively cheap now,” he said.
One of the uncertainties Hanke highlighted is Europe – a region he is familiar with being a member of the Atlantic Council’s EuroGrowth Initiative, which is aimed at building effective economic policy solutions for the region.
Aside from upcoming European elections, Hanke said that Greece may be coming into trouble with a payment due to creditors in less than one month’s time. Analysts from Brown Brothers Harriman agreed that this Greece issue could have serious consequences. “If this window of opportunity is not met, the situation could deteriorate quickly,” they noted in a report Monday afternoon.
If this scenario plays out, gold could benefit as a safe-haven, noted Hanke.
However, Hanke suggested that policymakers will likely kick the can down the road when it comes to Greece’s debt issue, “that’s probably going to happen.”
What’s more, despite the many wild cards in Europe, Hanke said he remains somewhat optimistic, expecting moderate growth.“There’s a great deal of uncertainty in Europe for 2017 – lots of elections and unattractive candidates across the board,” he said. “The only good thing going on is that the ECB (European Central Bank) has kept…the money supply growing at a modest pace,” he added, noting that money supply is a key determinant of nominal growth.