Gold Prices Will Move Higher Just Not Today – Michael Pento
(Kitco News) - While the gold market has seen positive gains since the start of the year, the metal’s time to shine won’t come until the fall when one portfolio manager expects to see a global bond market selloff.
Michael Pento, president and founder of Pento Portfolio Strategies said that he is currently underweight gold in his deflation/inflation portfolio, but he added that he expects to increase his exposure to the yellow metal later in the year as he expects the global economy to struggle under massively expanding debt.
Pento said that he is currently holding 10% to 18% in gold in his deflation/inflation portfolio. He added that gold is struggling as nominal interest rates are rising faster than inflation expectations, pushing real rates higher, making increasing gold’s opportunity costs.
“I don’t think gold is a sell, but It’s not the time to be overweight gold,” he said. “The time to go all in on gold is in October. I think this fall you are going to see the economy start to roll over.”
Pento’s comments come as gold prices struggle to hold on to critical support, after a positive month of gains. April gold futures last traded at $1,315.90 an ounce, down 1% on the day.
Pento said that he expects to see further “violent” selloffs in equity markets throughout the year as investors will be unable to withstand the weight of massive debt in a rising interest rate environment. He noted that U.S. consumer debt is currently at record highs at $15 trillion.
Along with record consumer debt, Pento said that government debt will continue to grow as the U.S. Treasury will need to raise close to $1 trillion this year.
“Who is going to buy this debt? Someone is going to have to buy this debt. It won’t be consumers because they have no savings,” he said. “Unless you repeal the laws of supply and demand yields will have to rise.”
As the U.S. economy starts to weaken as a result of debt, Pento said that he would expect central banks around the world to reverse course on expected monetary tightening and loosen the purse strings once again.
“The Federal Reserve will continue raise rates and then asset bubbles will pop. We have already started seeing that happen and it will only pick up steam in later in the year,” he said.