Gold's luster continues to shine as the economic outlook darkens
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(Kitco News) - The gold market may be losing some bullish momentum as prices remain well below last week's test of its all-time highs above $2,080 an ounce; however, the precious metal has not lost any of its luster as it continues to attract a lot of investor attention.
This past week I had the fantastic opportunity to listen to speakers at annual Sohn Investment conference. This conference, which is also a fundraiser for pediatric cancer treatment research, attracts some heavy weight investors and major gold bulls like David Einhorn, founder and president of Greenlight Capital; Jeff Gundlach, the founder of DoubleLine Capital and Stanley Druckenmiller, the chairman and president of Duquesne Capital.
For gold investors, the conference did not disappointed. Druckenmiller noted that he currently owns gold and silver, but was fairly lukewarm on these assets. He warned investors that he sees hard landing for the U.S. economy, which historical is not a great environment for gold and silver. However, he said that he is betting that geopolitical uncertainty and the growing dedollariztion trend will continue to support precious metals.
"It looks to me like the monetary and the fiscal authorities are kind of at the end of their rope, and given the fact that other countries have decided, particularly autocracies, not to hold their reserves and dollars, I'm betting for the time being, against the history of the performance of gold and hard landings," he said. "I could be wrong. Don't go out and buy gold. I could change my mind in a week or two, folks."
However, wrapping up the afternoon, Karen Karniol-Tambour, co-Chief Investment Officer at Bridgewater Associates, presented a much more bullish case for owning gold. She said that the precious metal is being underate and has a longer way to run.
For many investors, there is one significant factor that continues to drive interest in gold and that is central bank demand, which is not going away anytime soon. Last week the World Gold Council said that central banks bought 228 tonnes of gold in the first quarter, a record start to the year.
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We have said this many times before, this pillar of strength is creating solid value in the marketplace, which is why investors have been aggressively buying the dip. Despite Friday's 2% drop, gold prices held support above $2,000 an ounce.
Investors are starting to take notice of this value. Kitco's Anna Golubova reported this week that American consumers see gold as the second most-preferred investment as it catches up to real estate. According to the last Gallup Poll, 26% of Americans view gold as the best long-term investment, up sharply from 15% in last year. Investor interest in gold is at its highest level since 2012.
The survey also noted that 34% of Americans see real estate as the best investment, down compared to 45% last year.
Although more and more investors are starting to pay attention to gold, the market is still not ready to break to record highs. However, according to Edward Morse, head of commodity research at Citi, the spikes we have seen in the gold market are glimpses of what the precious metal is capable of.
He added that he sees gold prices rallying to $2,400 an ounce by the end of the year. “Our probability on that is fairly high. We remain bullish on gold. But we have to remind investors that this is a choppy road, and they need patience," he said in an interview with CNBC international affiliate in India.
Investors need to brace for further volatility but the long-term trend remains higher.
One final note, Kitco News will not be publishing a newsletter in the next two weeks as I will be on vacation.
See you in June.