(Kitco News) - Gold’s recent rally to all-time highs above $3,200 an ounce provides investors with a unique opportunity to capitalize on weaknesses in equity markets, according to one fund manager.
In an interview with Kitco News, Jerry Prior, COO of Mount Lucas Management and Senior Portfolio Manager of the KraneShares Mount Lucas Managed Futures Index Strategy ETF (NYSE: KMLM), said that he expects that gold will remain well supported even if the rally has pushed prices into overbought territory.
The comments come as gold prices continue to hold initial support above $3,200 an ounce. Spot gold was last traded at $3,211.80 an ounce, down 0.75% on the day.
Prior explained that gold remains a valuable asset as the unprecedented uncertainty has made it impossible for anyone to engage in any type of strategy or long-term planning.
“We saw a lot of uncertainty during COVID and then Russia’s war in Ukraine, but there has always been a playbook to follow,” he said. “There is no playbook we can use to navigate this unprecedented uncertainty. I think we have to throw the playbook completely out the window.”
Prior noted that President Donald Trump has paused his retaliatory tariffs for 90 days but has maintained a 10% baseline level on all imported goods. He pointed out that this will impact economic activity, and although the Federal Reserve could cut rates now, what will happen in three months if tariffs are removed or even tightened?
“We can say now that there will definitely be a recession, but an hour later we could have to take that view off the table,” he said. “Gold prices may be high, but I don’t see it as overvalued. I think it's perfectly valued for what we know today. You could call me back in an hour and I might tell you something different.”
Regardless of where gold prices are going, Prior noted that gold investors are sitting on solid profits. Gold prices are currently up 22% so far this year and up 37% in the last 12 months.
He added that these gains provide investors with a unique opportunity to rebalance.
“The only free lunch in finance is rebalancing,” he said. “This is the reason why investors should maintain a diversified portfolio.”
Prior explained that if you maintain a 10% allocation in gold and the rally has pushed that allocation to 15% or 20%, then you could take the extra profits and look for opportunities in other markets.
However, Prior also said that investors don’t have to make any decisions right away as the volatility is crippling valuations.
“If we can look at different probabilities, the range of outcomes for the S&P 500 is still pretty wide. It is either at 4,400 or 7,000, and that's hard to price in,” he said. “It may be one of those markets where if you have a reasonable asset allocation, it's best traded with 40 rounds of golf. Just turn off your screens and hit the links.”
