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When central banks and Wall Street are both buying gold, “that is a recipe for a bull market” - ByteTree's Charlie Morris

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(Kitco News) - The weakening dollar and rising sovereign risk mean that gold and Bitcoin are poised for large and sustained gains, according to Charlie Morris, Founder and Chief Investment Officer at ByteTree Asset Management.

“The econometrics are so simple,” Morris said. “It's absolutely clear that if you were in gold and Bitcoin, you just don't really have a bad day.”

Morris, whose company specializes in diversifying investors into alternatives like gold and crypto, spoke with Kitco News reporter Ernest Hoffman on April 12. He believes markets are witnessing the early stages of “a great bull market for precious metals.”

“The fundamentals feel right, and the dollar’s coming off the boil,” he said. “You put it together and you can see why the case is so strong.”

Morris said that for the first time in a generation, he’s seeing the gold price rising despite the lack of support from Wall Street. “I've been watching the gold market for 25 years and this is the first time I've seen the divergence between fund flows and the gold price,” he said. “It is different this time.”

Morris said investors should beware of rising sovereign risk when the U.S. 10-year bond yield goes over four percent. “Last October, the U.S 10-year went above four percent and the UK Prime Minister had to resign, and the Chancellor of the Exchequer,” he said. “They tried to bring in new pro-growth economic policies, that didn't work too well.”

“Then last month it happened again, and we saw five banks fail, and Credit Suisse, one of the greatest banks in the world, has gone down.”

He said the U.S. government’s reaction to the implosion of Signature Bank and SIlicon Valley Bank only increased the risk. “The reaction, the bank bailouts, was to protect depositors de facto across the board,” he said. “That means risk that used to sit with the private sector now sits with the public sector, not just in the U.S. but in the whole developed world.”

“The more sovereign risk there is in the world, then the higher the gold price ought to be.”

Morris said that under the circumstances, the recent inflows of Wall Street investment into gold are important. “It is significant, finally they're woken up to what's going on,” he said. “We've started to see a huge jump in central bank activity for geopolitical reasons. At the same time, we're now starting to see Wall Street coming in.”

“Gold's not fussy, it takes anyone's money from anywhere in the world, and there's plenty of demand,” he said. “If you get the central banks and you get Wall Street investors buying gold at the same time, then that is a recipe for a bull market.”

The combination of sustained inflation and poor returns on other assets makes Morris bullish on Bitcoin as well.

“I'm 99.9% sure, as sure as I can be, that the low for Bitcoin is in for this cycle,” he said. “Bitcoin is basically trading at $30,000, which is $1000 below the average since the last halving in May 2020. So we're back to the cycle average, and halving is in one year. Typically, we see at the end of the cycle, the Bitcoin price is normally above average so I'm thinking that if the high is $68,000, the average is $31,000, the low $16,000, I'm thinking somewhere around $40,000 over the next year makes a lot of sense for Bitcoin.”

“We're not going to get the big numbers, the six digits, the hundred-thousand-plus, until the next cycle, we need to get the halving behind us.”

Morris said much of the negativity and pessimism about Bitcoin over the last 18 months was unwarranted, as BTC was being blamed for failures in other areas of the cryptosphere.

“Last year, Bitcoin went to $16,000. If you read the papers, it went to $6,” he said. “Bitcoin never delivered any bad news. We can't blame Bitcoin, we just blame the people who are no longer involved. They've gone, Bitcoin’s still there.”

“It didn't go to $6, it went to $16,000 and it’s recovering very rapidly. I think it shows the resilience and the robustness of the asset.”

Morris believes both gold and Bitcoin will outperform over the medium term, and will complement one another as investments.

“I've always been a fan of gold, 25 years now, fan of Bitcoin for not quite 10 years, but most of it,” he said. “It's obvious that one's always in favor, it's either a good time for gold or it's a good time for Bitcoin.”

“This is a very good time to own inflation protection whilst it's underpriced.”

To learn about how to combine gold and Bitcoin as a risk-weighted hedge against inflation, watch the above video.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.