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If Gold Follows Copper's Path, Prices Could Rise To $1,475 - GraniteShares

Kitco News

(Kitco News) - Although gold prices are struggling to find enough momentum to push through its elevated trading range, one fund manager said that it wouldn’t take much to drive prices to new multi-year highs.

In a webinar at the start of the week, Will Rhind, CEO of GraniteShares, which manages the new gold-backed ETF (NYSE: BAR), said that he could see gold prices push to $1,475 an ounce if gold follows in the footsteps of copper. April gold futures last traded at $1,322 an ounce, down 0.42% on the day.

“The environment is good for gold and we think it is only going to get better,” he said.

Rhind explained that at the start of the year, copper achieved a crucial technical milestone. Copper prices rallied to the 50% retracement level from its 2011 highs to its 2015 lows. He added that if gold accomplished the same goal, prices would be above $1,400 an ounce.

With market volatility picking up, theatening global growth expectations, Rhind said that he would expect gold to outperform copper.

“An environment where volatility is increasing is conducive for gold, more so than for other commodities like copper and silver that are more linked to business cycles,” he said.

As to what will be the next catalyst for gold, Rhind said that markets need to see a rise in surprise inflation expectations, coupled with a market correction.

“People are now starting to accept the idea that inflation is increasing,” he said. “If gold is going to respond to inflation pressures in a meaningful way there needs to be some kind of upside surprise.”

Along with stronger than expected inflation pressures, Rhind said that he is also watching the equity market closely. He explained that there are signs that momentum is starting to shift.

“Equity markets are sucking all the oxygen from commodity and gold markets,” he said. “Rising commodity prices themselves indicate the late stages of a business cycle.”

As to how much gold an investor should have in an allocation that will have a meaningful impact on a portfolio.

“A 1% position in gold is not really going to have much of a mathematical difference good or bad on your portfolio. You need to start with a number that will do something for your portfolio and that probably starts around 4%,” he said. “Typically, the range we see is between 4% or 7%.”

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