Look To Buy Gold On The Dips As Inflation Could Shock Markets - Aberdeen Standard Investments
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(Kitco News)- King Dollar willrule over gold prices in thenear-term, but the yellow metal will continue to be an important diversifierand safe-haven asset for investors in the long-term according to one fundmanager.
In a telephone interview with Kitco News Maxwell Gold, directorof investment strategy at Aberdeen Standard Investments, saidthat he sees gold as a strong buy on dips as volatility will continue to weighon financial markets.
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| Maxwell Gold, director of investment strategy at Aberdeen Standard Investments |
Gold’s comments come as the U.S. dollar holds near itshighest level since June 2017, which has pushed gold to a one-month lows asprices hold above critical psychological support above $1,200 an ounce. Comex December gold futures last traded at $1,202.60 an ounce, relatively flat on the day.
Weaker oil prices, which declined for 12 straight tradingsessions, dropping nearly 25% since hitting a four-year high in early October.Gold said that the drop in oil prices is lowering inflation expectations, whichin turn is driving real interest rates higher, pushing the U.S. dollar and bondyields higher.
However, he added that inflation is much more than justenergy prices. He explained that wage pressures have increased, raising therisks of a surprise inflation shock to financial markets.
“I think inflation remains one of the biggest underpricedrisks in the marketplace,” he said. “Right now the two crowded trades inmarkets are long U.S. dollar and short U.S. bonds. Any kind of shock tofinancial markets could reverse these two trades, which would benefit the goldmarket.”
Along with the threat of rising inflation, Gold said thatthe U.S. economy continues to move through the late-stage of its businesscycle. He added that slowing economic growth next year will force the FederalReserve to moderate its tightening path, which will take further steam awayfrom the U.S. dollar.
“There are a lot of headwinds facing gold in the near-termbut I still think investors are starting to see tangible risks in themarketplace and are slowly buying gold these dips,” he said.
While Gold is optimistic on the yellow metal through themedium to long-term, he also sees potential for silver to eventually regain itsluster.
“Silver has been a tough story even as we see marketfundamentals improving,” he said. “But in the current environment we think thatsilver can still outperform gold in an inflationary environment.”
Silver is current trading at its lowest level togold in nearly 25 years. Kitco.com shows the gold-silver ratio trading at 85.73points, meaning that it takes nearly 86 ounces of silver to equal one ounce ofgold. December silver futures last traded at $14.0.10 an ounce, unchanged on the day.
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.  |