Bridgewater sees gold prices pushing above $2,000 as central banks ignore inflation
(Kitco News) - The World's biggest hedge sees the potential for a new all-time high in gold as central banks give up the fight against inflation and uncertainty dominates investor sentiment.
In an interview with the Financial Times, Greg Jensen, co-chief investment officer at Bridgewater Associates, which manages $160 billion, said that investors should consider gold as a cornerstone asset in their portfolios as he sees prices pushing above $2,000 an ounce.
The comments come as gold prices hold critical support in the face of record valuations in equity markets. February gold futures last traded at $1,556.70 an ounce, up 0.78% on the day.
Jensen said that extremely loose monetary policy will be a significant driver for the yellow metal. “There will no longer be an attempt by any of the developed world’s major central banks to normalize interest rates. That’s a big deal,” Jensen was quoted as saying in the interview.
Jensen added that central banks, particularly the Federal Reserve, won’t be in a hurry to raise interest rates, even if inflation starts to pick up.
“The Fed won’t be pre-emptive,” he said.
Jensen’s outlook is in line with the sentiment expressed by Federal Reserve Chair Jerome Powell.
“In order to move rates up, I would want to see inflation that’s persistent and that’s significant—a significant move-up in inflation that’s also persistent before raising rates to address inflation concerns,” Powell said after the U.S. central bank held rates steady in December.
Looking at interest rates, Jensen said that he also wouldn’t rule out the possibility that the Federal Reserve continues to slash interest rates back to zero if it looks like the U.S. economy is headed towards a recession.
While interest rates will be a significant driver for gold, it’s not the only factor Jensen is watching. In the interview, he said that market uncertainty will support the precious metal.
“There is so much boiling conflict,” he said. “People should be prepared for a much wider range of potentially more volatile set of circumstances than we are mostly accustomed to.”
Jensen said that he sees the potential for a weaker U.S. dollar in 2020, another factor that is positive for gold.
“When you look at the geopolitical strife, how many foreign entities really want to hold dollars? And what are they going to hold? Gold stands out.”
While Bridgewater is garnering new attention for its bullish gold forecast, it’s not a new stance. Nearly three years ago, Ray Dalio, the founder of Bridgewater, recommended in a LinkedIn post that investors hold 5% to 10% of their portfolio in gold.