“ ‘ When interest rates are zero or near zero, then gold is an attractive medium to have because you don’t have to worry about not getting interest on your gold and you see the gold price will rise as uncertainty in the markets are rising.’ ”
That is Mark Mobius, an emerging-markets investing pioneer, sharing his view in a Friday interview with Bloomberg TV that gold prices, set to mark their highest settlement history, have further room to run.
“I would be buying now and continue to buy,” Mobius told the business news platform.
If gold prices GOLD, +1.60% end Friday’s session above $1,891.90 an ounce it would mark its highest finish based on records going back to November 1984 for a most-active contract, according to Dow Jones Market Data.
After some listless trade in recent weeks, gold prices have broken out to the upside, supported by concerns about the economic impact of the COVID-19 pandemic and monetary and fiscal policies that threaten to stoke inflation.
Gold’s steady rally toward all-time record levels also has come as the Dow Jones Industrial Average DJIA, -0.68%, the S&P 500 index SPX, -0.61% and the technology-tilted Nasdaq Composite Index COMP, -0.93% has surged since hitting a coronavirus low in late March.
The Dow is up 43% from its recent low on March 23, the S&P 500 index has gained 44%, while the Nasdaq Composite has climbed nearly 52%. Because gold tends to fall as stocks, considered risky assets, rise, the fact that bullion has gained substantially during stocks’ price rally is notable.
Indeed, gold, prices have climbed 20% since late March and more significantly the commodity has climbed 25% so far this year while both the Dow and S&P 500 are nursing year-to-date losses and the Nasdaq has a 16% return so far in 2020.
Still, weakness in the U.S. dollar DXY, -0.36%, which is expected to continue, is one of the reasons Mobius foresees further gains for the yellow metal.
Mobius says that investors find themselves in a curious spot where buying stocks and gold are both viewed as ways to preserve capital and avoid erosion from inflation. “We’re in a very interesting situation where people are looking at stocks to preserve their capital because stocks will adjust to inflation and also gold. Their sort of hedging their bets.”
The investor said that low and negative interest rates that have prevailed in parts of the world, including Europe, have reduced the opportunity cost of owning gold, providing further support.
Slack in supplies of phyiscal gold from miners, who also are dealing with the viral outbreak, also could further propel prices of previous metals, Mobius said.
“With this COVID, I assume that mine output should be declining for gold and, of course, that puts additional pressure upward on the price,” he said.
Mobius founded Mobius Capital Partners in 2018 after a three-decade run at Franklin Templeton Investments as a renowned value manager.
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