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'That's why you own gold': Investors get rewarded as gold kicks off two-year cycle, says VanEck CEO
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(Kitco News) A situation like the banking crisis is why people own gold and precious metal investors are getting rewarded, said VanEck Associates CEO Jan Van Eck, who sees a new two-year bull rally beginning in the gold space.
Gold is up more than 7% on the month, with June Comex gold futures last trading at $1,977, down 1.23% on the day. After testing $2,000 an ounce, there is some profit-taking happening as risk sentiment sees a slight improvement at the start of the trading week.
But the outlook for gold in the next two years remains solidly bullish, according to Van Eck.
"We are at the very beginnings of what could be a several-year cycle in gold. I also put Bitcoin in that category. Finally, as a gold investor, you've been rewarded over the last couple of weeks. Weakness in the banking system and gold rallied. That's why you own gold," Van Eck told CNBC.
The two-year bull cycle will be driven by the Federal Reserve ending its tightening and markets getting stressed out by the consequences of higher rates. And the end scenario for this environment will be the Fed cutting rates again.
"It could take a year or more for those consequences to roll through the commercial real statement market, the banking and lending dynamics, and maybe we have a shallow recession," Van Eck said. "But at some point, the Fed is going to start easing, and that's when gold is really going to party."
VanEck Associates, which has $69 billion in assets under management, sees 2023 as a sideways year for many assets as liquidity will remain restrained.
"This year … the water in the bathtub will be flat. There had been some infusions of liquidity into the market. One was year-end from Asia, China money supply, and Japanese bond buying. That's what led to the January spike in tech stocks. The Fed stimulation and support of banks will be short-term," the CEO said. "Long-term, I don't think those are sustainable. At the end of the year, the water in the bathtub will be the same. It will be a sideways year. You'll be pretty happy with your bonds positions."
