Hold 15% of your portfolio in gold as prices push to $1,850 - London Capital Group
(Kitco News) - Solid support in the marketplace due to inflation concerns and geopolitical uncertainty will help push gold prices through $1,800 an ounce, according to one market analyst.
In an interview with Kitco News, Jasper Lawler, head of research at London Capital Group, said that he thinks gold prices will continue to “meander higher” to $1,850 an ounce before investors start looking at and thinking about significant profit taking.
“There's no a big catalyst to sell gold,” he said. “You still need it for these underlying reasons as a hedge looking towards inflation and political uncertainty.”
He added that the gold market would have to see a significant selloff below $1,700 an ounce before investors start to question the current uptrend.
“My confidence in gold, won't be rocked by a few tens-dollars movements,” he said. “I think we have to get a much more substantial pullback to undo the idea that we had a multi-year base and that we've broken out of it.”
Along with holding precious metals in a portfolio, Lawler said that investors should also look at holding miners. Although a higher gold price is adding to a producer ’s profitability, Lawler said that there are other important factors that make mining an attractive investment.
“I've been very much watching the gold miners outstripping tech,” he said. “Some of these big name are up close to 40% this year,” he said.
As to how much gold an investor should have in their portfolio. Lawler said that 10% is the minimum in the current environment. However, he added that his personal preference is slightly higher.
“I edged towards 15% in this environment. Not always, but I think gold has a lot further to go, notwithstanding maybe the correction here and there as we said, maybe approaching $1,850,” he said.
Although gold has room to go higher, Lawler said that the one headwind he continues to keep an eye on is the U.S. dollar. Although the greenback has lost some momentum in the last few months, Lawler said that it remains a resilient asset.
“I've been watching, DXY looking for some sort of sign of a bottom, but it can't quite make it. So for now, I think while the dollars week, gold to me and is higher,” he said. “But if we do get a sudden burst of activity in the dollar, I think gold, just by default, pulls back.”
However, Lawler added that it will be difficult for the U.S. dollar to find solid support in an environment where the Federal Reserve continues to keep interest rates artificially low.