Gold Is An Attractive Investment, Just Not Now- Fund Manager
(Kitco News)- Gold is an attractive investment on the horizon, but there is no reason to jump into the market at this moment, according to onefund manager.
In a recent interview with Kitco News, Keith Dicker, chiefinvestment officer and president of IceCap Asset Management, said that hepersonally likes the precious metals sector, but has yet to add any to hisfirm’s portfolio. He expects the market will struggle until there is significantglobal financial market turmoil.
Dicker’s comments come as gold has fallen below criticalsupport at $1,300 an ounce, dropping to the lowest levels since late December2017. June Comex gold futures last traded at $1,289.10 an ounce, down 0.17% onthe day.
“For the average investor you need a reason to get into goldand there isn’t one at the moment. Gold needs a crisis before investors areinterested again,” he said.
Although gold could continue to struggle in the near term,dominated by a strong U.S. dollar, Dicker said it will be a less of a headwindin the future. He explained that in a financial crisis, he would expect bothgold and dollar assets to rise together.
“I think the idea of a strong U.S. dollar and a strong goldprice will shock a lot of people,” he said. “It’s pretty easy to see that whenthings are going great, money pushes out to the peripheries and when times arebad money goes back to the core, goes back into safety, which is the U.S.dollar and gold. Dollar strength will happen first and then gold will follow.”
As to the spark that will ignite the next major crisis,Dicker said that investors need to pay closer attention to Europe and itssovereign debt issues. He explained that a lot of the fiscal problems raised in2008 have never been resolved ten years later.
“For better or worse, after 2008, U.S. companies addressedimportant issues. American banks were recapitalized, bad debt was removed frombalance sheets, but the Europeans have never done that,” he said. “What’s evenmore worrisome is that European sovereign debt has been completely removed fromthe private sector, the market is completely controlled by the central bank.”
While the European Central Bank has been coy about endingits asset purchase program in September, Dicker said that the central bank willhave to stop eventually. When that happens, the European bond market willcollapse.
“They are not going to be able to continue to buy sovereigndebt forever and right now they are the market,” he said. “You will seelong-term rates surge around the world.”
Looking at the U.S. bond market, although 10-year bondyields have pushed past 3.00%, hitting levels not seen since 2011, Dicker saidthat the move is supported by market fundamentals. He explained that U.S. bondyields have been driven higher by rising interest rate expectations. The same can not be said for the European market, he added.
“A surge in European bond yields will create a whirlwind ofcrisis every,” he said. “That will be the time to buy gold.”
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.