Billionaire hedge fund manager says an investment in gold is the safest way to combat uncertainty.
Billionaire hedge fund manager Ray Dalio recently made news when he once again praised gold amid the numerous risks that are piling up. The long-term advocate of the metal conceded that nobody can predict the course of situations such as the U.S.-North Korea one, but explained that an investment in gold is the safest way to combat uncertainty.
True to his reputation, the money manager suggested an allocation of up to 10% in gold while reminding us that tensions with North Korea could boil over into an all-out war. Yet the metal isn’t only finding favor with old bulls as it reaches $1,305 in its ongoing rally – as seen on Newsmax, new investors are also warming up to the idea of moving into gold.
In April, Pictet Wealth Management currency strategist Luc Luyet assumed a neutral stance on bullion while flagging the possibility of a pullback. Since then, gold went on to reach its highest level since November, and Luyet thinks the rally could keep going.
He points to a lower likelihood of rate hikes as the primary driver that will allow gold to keep pushing, especially with inflation staying behind the Fed’s target. “Given the fact that inflation should remain relatively low, we do not expect the Fed to be capable of doing much more than one hike in 2018,” said Luyet.
“The dollar should be penalized next year by the weaker growth outlook and by the less active Fed, so we would expect the dollar to gradually weaken and that should support gold.”
As implied in the article, political uncertainty in the U.S. continues to bolster the metal’s appeal. Among all the geopolitical risks, the recent back-and-forth between Trump and North Korea have given gold its biggest leg-up, with the threat of the nation’s military arsenal becoming more and more apparent.
Luyet noted that these tensions are particularly supportive of gold prices while hurting stocks and Treasuries, and the lack of a peaceful resolution in sight should ensure the metal stays on track to post further gains. According to a forecast by Bank of America Merrill Lynch, gold could reach $1,400 by early next year, helped by lower long-term U.S. interest rates and a lack of economic reform.