Now is the time to get aggressive in gold as Fed keeps rates at 0% until 2022 - Sprott CEO
The Federal Reserve is not looking to raise interest rates from its zero-bound target for the next two years and according to Peter Grosskopf, CEO of Sprott Inc., this is now the time for investors to be aggressive in the gold market.
In an interview with Kitco News, Grosskopf said that in the current environment where inflation is expected to pick up in a low interest rate environment, a 5% to 10% allocation to gold will become a necessity for all investors; however, he added that he is a lot more comfortable holding 30% of his portfolio in gold.
“Eric Sprott would be a hundred percent weighted,” he said. “I think it's time to be quite aggressive with your bullying allocations, just given how much of a credit crisis we're really still in.”
Grosskopf said that he is not surprised with the Federal Reserve’s two-year interest rate projection; he noted that debt levels have ballooned out of control as governments and central banks have tried to support the global economy devastated by the COVID-19 pandemic.
“We think that the central banks have no choice other than to anchor rates at zero for the foreseeable future. This is a long-term need for them now,” he said.
To achieve their goal of lower-for-longer interest rates, Grosskopf said that it will only be a matter of time before the Federal Reserve embarks on a yield-curve-control program. He added that this will create a positive environment for gold.
“If you go back to the Second World War era, the treasury managed interest rates for almost a 10-year period,” he said.
Although Grosskopf is bullish on gold, and expects that it is only a matter of time before prices push to an all-time high, he added that the market needs a new spark to ignite a new rally and break prices out of their current months-long trading range.
He added that a correction in equities could be the spark the gold market has been waiting for. He said that he does not think that the optimism, for a sharp economic recovery, driving equity markets can be sustained.
“[Gold is] such a massive market and it needs other markets to kind of operate with its thesis. And I think a correction in the equity markets would help that the most right now,” he said. “Personally, I don't buy the V-shaped recovery at all. I would think that you should be very cautious with this equity market rally.”