Although the price of gold has been on the rise long before the onset of the coronavirus (see my previous article), the FED’s surprise rate cut will be the catalyst for new highs.  Those who attended the annual Prospectors & Developers Association of Canada are very excited about the near term future of the precious metal.

1582848200.jpg(Kitco News) – Despite gold’s recent lackluster performance the price can easily go higher if the Federal Reserve cuts interest rates by 50 basis points at its next meeting, according to Chantelle Schieven, head of research for Murenbeeld & Co.
On the sidelines of the Prospectors and Developers Association of Canada (PDAC) 2020 conference, Schieven said that she is more bullish on gold than she has been in a long time as central banks look to ease interest rates to boost consumer sentiment, weakened by the spreading coronavirus.

The opportunity cost of holding gold is zero now, and even better in real terms.  With inflation (using PPI number of 2.1%) significantly higher that the 3 month Treasury yield (1.25%) gold is better than cash.

In times of uncertainty investors turn to Gold as a hedge against unforeseen disasters since physical gold is one of the few investments that is not simultaneously an asset and someone else’s liability. In other words it is a real asset not just an IOU.

With excess liquidity for years now (inflation?) and the threats to global growth from COVID-19, we may see the price of gold bullion get to $2000.

 


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About the Author

Malvin Spooner is a veteran money manager, former CEO of award-winning investment fund management boutique he founded. He authored A Maverick Investor's Guidebook which blends his experience touring across the heartland in the United States with valuable investing tips and stories. He has been quoted and published for many years in business journals, newspapers and has been featured on many television programs over his career. An avid motorcycle enthusiast, and known across Canada as a part-time musician performing rock ‘n’ roll for charity, Mal is known for his candour and non-traditional (‘maverick’) thinking when discussing financial markets. His previous book published by Insomniac Press — Resources Rock: How to Invest in the Next Global Boom in Natural Resources which he authored with Pamela Clark — predicted the resources boom back in early 2004.

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