Billionaire investors John Paulson and Mark Mobius think you should own some gold
(Kitco News) - The gold market continues to struggle to attract bullish momentum as prices hover above $1,800; however, the precious metal still has significant support from significant billionaire investors.
This week John Paulson, president and portfolio manager at Paulson & Co and Mark Mobius, founder of Mobius Capital Partners, both made headlines for bullish calls on the precious metal.
Monday, in an interview with Bloomberg's David Rubenstein, Paulson said that he prefers gold over bitcoin and that the precious metal looks attractive in the current inflationary environment.
"Gold does very well in times of inflation," he said. "The last time gold went sort of parabolic was in the 70s when we had two years of double-digit inflation."
Paulson added that gold can go "parabolic" because it is relatively small compared to the overall financial market.
"If you own long-term Treasury bonds that are yielding 2% and interest rates move up to 5%, those bonds fall materially in value. Likewise, if you have cash sitting in a bank that you are earning 0% on and inflation's 4%, you're gradually eroding the value of your money," he said in the interview.
"As inflation picks up, people try and get out of fixed income. They try and get out of cash. And the logical place to go is gold," he added. "Because the amount of money trying to move out of cash and fixed income dwarfs the amount of investable good, the supply and demand imbalance causes gold to rise and the more it rises it sort of feeds on itself and as the potential to go parabolic."
Meanwhile, in a septate interview with Bloomberg, Mobius said that investors should hold 10% of their portfolio in gold.
He said that he also sees value in gold as the purchasing power of fiat currencies continues to erode.
"Currency devaluation globally is going to be quite significant next year given the incredible amount of money supply that has been printed," he said. "It is going to be very, very good to have physical gold that you can access immediately without the danger of the government confiscating all the gold."
Despite the positive sentiment in the gold market among influential fund managers, the gold market has been caught in a relatively narrow trading range with support at $1,800 and resistance at $1,820 an ounce.
Many commodity analysts have noted that gold is struggling to attract attention. Investors are laser-focused on a potential shift in U.S. monetary policy as the Federal Reserve looks to reduce its monthly bond purchases by the end of the year.
For many analysts, Friday's nonfarm payrolls report will be an essential catalyst for gold. Some analysts have said that weak job growth in August could force the Federal Reserve to delay its tapering plans, which could send gold prices back to $1,900 an ounce.
However, at the same time, a stronger than expected employment report could solidify the Federal Reserve's plan and push gold prices back to their recent lows.