Investors can't ignore the threat of currency devaluation - Willem Middelkoop
(Kitco News) - More generalist investors are jumping into the gold market because they can no longer ignore the threat of global currency debasement, according to one fund manager.
In an interview with Kitco News, on the sidelines of the Mines and Money Online Connect global virtual mining conference, Willem Middelkoop, founder and CEO of the Commodity Discovery Fund, said that while gold bulls are getting excited about generalist entering the market, this trend actually started in mid-2019 as billionaire investors like Ray Dalio, started extolling the virtual of the precious metals.
Earlier this week Ohio Police & Fire Pension Fund (OP&F) was the latest generalist fund to make headlines in the gold market after it approved a 5% allocation in the precious metal to diversify its portfolio and hedge against the risk of inflation.
Middelkoop said that this is only the first wave of new capital to flow into the precious metal and mining sector. He added that more money will come as investors start to see higher inflation as a result of all the stimulus that has been.
“It took four years after [Leman Brothers default] to grow the balance sheet by $3 trillion. It took us four months this year to grow the balance sheet by 3 trillion. It's not ending,” he said.
In a world awash in liquidity, Middelkoop said that he could see gold prices push to $10,000 an ounce within the next 10 years.
“We need a new anchor for the world's monetary system,” he said.
But it’s not just gold that Middelkoop is bullish on. He said that he also likes silver and see the potential for silver to reach triple digits.
“It's only the question of when will silver reach $50 before we will get it run towards $100 and I'm convinced the rally won't be over,” he said. It will take years before we see $200, $300. I see great, great upside.”
With gold prices expected run higher for the next decade, Middelkoop said there is still plenty of value in the market. He added that now is the best time for investors to build their portfolio and protect their wealth.
Looking at portfolio allocation, Middelkoop said that he starts with a 25% position in gold and silver bullion, 25% in real estate, 25% in cash and 25% in undervalued equities. He added his fund is mostly invested in exploration companies as they offer the most value for investors.
However, he also said that he can’t understate the importance of holding physical gold as a core asset.
“We love exploration. It's a speculation and you can do very well with speculation, but you want to make sure your wealth will always stay there,” he said. “You need a proper physical allocation.”