Gold remains a tactical long-term asset, but Bitcoin is undervalued right now - ReSolve Asset Management

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By Neils Christensen
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Gold remains a tactical long-term asset, but Bitcoin is undervalued right now - ReSolve Asset Management teaser image

(Kitco News) - Gold prices may be stuck in a consolidation pattern after their explosive rally earlier this year, but one Canadian investment firm still sees the precious metal in a structural bull market even as it has turned tactically neutral in the near term.

Speaking with Kitco News, Richard Laterman, Portfolio Manager at ReSolve Asset Management, said the current correction in gold should not surprise investors, given the magnitude of the rally that began in 2022.

“We remain strategically and structurally bullish,” Laterman said. “The structural bull market is sound.”

However, he added that the “hot tactical trade has lost steam,” describing the firm’s short-term signals on gold as neutral.

The comments come as gold prices continue to consolidate after hitting record highs earlier this year. Spot gold last traded at $4,544.60 an ounce, up 1.42% on the day. Although bullion has pulled back sharply from its peak, Laterman argued that significant drawdowns are common during major secular bull markets.

He pointed to the 1970s gold rally, when prices surged from roughly $35 an ounce to $850 but still experienced a 47% correction along the way. He also noted that between 2001 and 2011, gold rallied from about $250 to nearly $2,000 an ounce while suffering multiple double-digit pullbacks.

“In large structural bull markets, these kinds of corrections are par for the course,” he said.

Laterman said ReSolve’s systematic strategies recently trimmed some gold exposure after prices became “parabolic,” locking in gains before rebuilding positions following the correction.

“We took profits. We didn’t take the whole position off, but our systems are designed to capture some of that excess,” he explained.

While the firm maintains long-term exposure to gold, its more active tactical models are currently net short precious metals to offset some of the portfolio’s strategic long allocation.

Still, Laterman emphasized that gold’s role in global portfolios is evolving beyond its traditional function as a geopolitical hedge.

“I think gold is earning its place in portfolios much more as a strategic component,” he said. “It’s upgraded from a tactical hedge to a structural position.”

According to Laterman, one of the biggest shifts in the gold market came after Western governments froze Russian reserve assets in 2022. He described the move as a “Rubicon moment” that fundamentally changed how central banks and sovereign allocators think about reserve assets.

“That shifted the mindset of any allocator, any sovereign wealth fund, any central bank reserve manager of a country that might be non-aligned with the U.S.,” he said.

Although ReSolve remains constructive on gold over the long term, the firm appears increasingly enthusiastic about Bitcoin as part of its broader alternative currency strategy.

Laterman noted that the Canadian firm launched a U.S. product last year that combines dedicated exposure to both gold and Bitcoin, describing the strategy as a “currency debasement stack.”

Currently, the allocation between the two assets sits at roughly two-thirds gold and one-third Bitcoin after the firm increased its Bitcoin weighting as volatility in the cryptocurrency stabilized.

“We want exposure to that alternative currency trade,” Laterman said. “Whether it’s gold or Bitcoin, ultimately it’s a trade against fiat currencies.”

He noted that ReSolve’s models successfully avoided much of Bitcoin’s sharp downturn last year by exiting positions early in the drawdown. The firm only recently began rebuilding exposure after spending roughly five months largely out of the market.

Despite Bitcoin’s notorious volatility, Laterman said the cryptocurrency has become an increasingly important component within diversified portfolios because of its relatively low long-term correlation with both gold and equities.

The broader backdrop supporting both gold and Bitcoin remains intact, he added, citing persistent fiscal deficits, geopolitical fragmentation and concerns about currency debasement.

“I don’t think fiscal consolidation in the U.S. is something markets really expect,” he said. “We’re probably going to continue to see large deficits.”

At the same time, Laterman warned that the global economy is entering “paradigm-shifting times” marked by rising geopolitical tensions, sticky inflation and growing economic inequality.

“I think it’s pretty obvious that we are in unusual, perhaps unprecedented, times,” he said.

Kitco Media

Neils Christensen

Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @KitcoNewsNOW

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