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It's now 'mandatory' to hold gold as Fed supports infinity QE - Sprott's Grosskopf

Kitco News

The Federal Reserve is wrapping up its first regularly scheduled monetary policy meeting since the global economy was turned upside down because of the COVID-19 pandemic.

Since early March, the U.S. central bank has thrown all it can at the growing economic crisis; in less than two months, it lowered interest rates to the zero bound range and introduced unlimited quantitative easing measures.

Peter Grosskopf, chief executive officer at Sprott Inc., said that he doesn't think the Federal Reserve has much ammunition left but will continue to buy government debt to support the economy.

"We do think the Feds end up being the subject of last support for the treasury market," he said. "The important subject in the market, the important theme is financial repression."

In this environment, Grosskopf said that it has become a necessity for investors to hold some gold and that it is only a matter of time before prices push above the 2011 highs.

"I do think that the current environment is more supportive for gold and that the gold thesis has been accelerated by the crisis, whereas it has always been a fringe asset," he said. "What's changed now is that absolutely more people are looking at this as being a mandatory insurance policy to what they hold in fiat currencies."

As to what is the right amount of gold an investor should hold in their portfolio. Grosskopf said that he still recommends 5% to 10%, which would also include some mining companies.

"In the world right now with the amount of debt, the credit stress, and amount of fiat of currency printing, you're not safe by not having 5% of your household wealth and gold at this time," he said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.