(Kitco News) - The gold market continues to drive toward $3,000 an ounce and it remains the standout asset in a world filled with economic uncertainty and geopolitical turmoil, according to one fund manager.
Although gold is trading at fresh all-time highs above $2,980 per ounce, Ryan McIntyre, Managing Partner at Sprott Inc., told Kitco News that he doesn’t see it as overvalued, as demand for safe-haven assets is surging.
“I would say that equity valuations are the highlight of overvaluation on many different metrics,” he said. “When you look at what is happening in the world and you consider the potential reward versus the potential risks, to me, gold still stands out as the place to be.”
The comments come as spot gold prices trade at $2,972.10 an ounce for a gain of 1.3% on the day. At the same time, the S&P 500 continues to slide, last trading at 5,572 points, down 0.5% on the day. Gold prices are currently up more than 13% so far this year, while the broad equity market index is down nearly 6%.
McIntyre said it's not just a correction in equity markets driving safe-haven demand into gold; he explained that economic risks have now risen to sovereign levels as government debt grows unsustainably.
“Governments can’t just swoop in and bail out the banks or the tech companies anymore, and that’s where the huge risks come in,” he said.
Exacerbating the economic risk is the growing deglobalization trend, as the global economy faces another trade war. McIntyre explained that the world is losing a lot of cohesion as nations look inward, with the United States becoming the poster nation for this trend as President Donald Trump continues to push his 'America First' policies.
“The U.S. government may be trying to rein in the deficit to some extent, but as a consequence, they are losing a lot of trust along the way, along with many of the synergies that come with working together,” he said.
Along with growing economic uncertainty, McIntyre said that he also expects this deglobalization trend to push inflation higher, supporting both gold and silver as real assets.
He noted that in the current environment, critical resources like copper and rare earth minerals will go to the nation that pays the most, making them solid inflation hedges.
“Economic growth depends so much on technology that nations are going to need to have their own stockpiles of these resources, so prices will continue to rise,” he said. “I think the race for commodities is only going to intensify.”
However, what makes gold and silver stand out compared to broader commodities is their role in the monetary system. Central banks have bought more than 1,000 tonnes of gold in each of the last three years, well above the 10-year average.
McIntyre noted that he expects nations to continue building their gold reserves as trust among Western economies continues to erode. He emphasized that gold is the ultimate stand-alone currency as it carries no third-party geopolitical risks.
McIntyre said that this central bank demand will provide a solid floor underpinning the broader market and creating value for generalist investors.
Although gold prices have moved within striking distance of $3,000 an ounce, McIntyre said that there are still plenty of opportunities for investors to enter the market.
He added that investors can buy some gold now and continue adding to their positions every time the price dips. At the same time, he recommended investing 75% of the position in gold and 25% in silver.
“If you buy when you see a correction, you won’t be putting all your eggs in one basket,” he said. “With this plan, you will never be caught chasing the market because, over time, I do expect gold prices will continue to perform well.”
