Opinion: Money managers no longer hate gold, saying it’s undervalued
The world’s biggest and most powerful money managers usually hate gold.But not today.The latest survey of nearly 200 money managers worldwide, controlling more than half a trillion dollars in investment assets, shows a sudden and rare burst of bullishness about the yellow metal.
They’re worried about inflation, stagflation and global protectionism, and they think gold is the best insurance against all three.And at less than $1,300 an ounce, they also think, for only the third time in a decade, that it is undervalued.But risks remain, including valuation, inflation, rising interest rates and global trade conflict. (President Donald Trump said during the campaign that financial assets were in a “big fat bubble,” which presumably means it’s even bigger and fatter now.) The biggest risk is that Trump’s mercantilist policies will introduce a beggar-thy-neighbor round of reprisals elsewhere. The rise in the U.S. dollar since the election is already a negative for the United States, as it hurts exports and drives up the cost of imports. In a mercantilist world, every country wants a cheaper currency. But currencies are a zero-sum game. The one that can’t be devalued by central bank activity is gold.
DYI: Gold is neither under nor overvalued as it is trading (by DYI’s measurement) around its mean in relationship to stocks. Dow/Gold Ratio is currently at 16.64 to 1.
Which way will gold move? I have no idea! What DYI does know that the Dow/Gold Ratio is trading at its mean and a small position is warranted.
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