Gold Prices Will Move Higher Just Not Today - Michael Pento
(Kitco News)- While the gold market has seen positive gains since thestart of the year, the metal’s time to shine won’t come until the fall when one portfoliomanager expects to see a global bond market selloff.
Michael Pento, president and founder of Pento PortfolioStrategies said that he is currently underweight gold in hisdeflation/inflation portfolio, but he added that he expects to increase hisexposure to the yellow metal later in the year as he expects the global economyto struggle under massively expanding debt.
Pento said that he is currently holding 10% to 18% in goldin his deflation/inflation portfolio. He added that gold is struggling asnominal interest rates are rising faster than inflation expectations, pushingreal rates higher, making increasing gold’s opportunity costs.
“I don’t think gold is a sell, but It’s not the time to beoverweight gold,” he said. “The time to go all in on gold is in October. Ithink this fall you are going to see the economy start to roll over.”
Pento’s comments come as gold prices struggle to hold on tocritical support, after a positive month of gains. April gold futures lasttraded at $1,315.90 an ounce, down 1% on the day.
Pento said that he expects to see further “violent” selloffsin equity markets throughout the year as investors will be unable to withstandthe weight of massive debt in a rising interest rate environment. He noted thatU.S. consumer debt is currently at record highs at $15 trillion.
Along with record consumer debt, Pento said that governmentdebt will continue to grow as the U.S. Treasury will need to raise close to $1trillion this year.
“Who is going to buy this debt? Someone is going to have tobuy this debt. It won’t be consumers because they have no savings,” he said.“Unless you repeal the laws of supply and demand yields will have to rise.”
As the U.S. economy starts to weaken as a result of debt,Pento said that he would expect central banks around the world to reversecourse on expected monetary tightening and loosen the purse strings once again.
“The Federal Reserve will continue raise rates and thenasset bubbles will pop. We have already started seeing that happen and it willonly pick up steam in later in the year,” he said.
By Neils ChristensenFor Kitco News
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