The Federal Reserve’s aggressive monetary policy stance has pushed the US dollar to its highest level in more than two decades. This, in turn, hurt commodity markets and the price of gold saw sharp drops. But one fund manager says despite the recent surge, investors still need to be over-positioned in commodities. He also notes that this position should be under half.
“Gold price should actually be closer to $1,000!”
Robert Minter, director of ETF Investment Strategy at Abrdn, says price action is impressive where US dollar and bond yields are, despite gold’s 9% decline this year. He also notes that gold should trade much closer to $1,000 rather than above $1,600. In this context, Minter makes the following statement:
It is surprising that the price of gold has not been lower. Investors find reasons to hold on to gold despite the US dollar and interest rates.
“When they see something break, they will turn to gold!”
Minter adds that what’s holding gold is all the investors waiting on the sidelines waiting for global central bank policies to disrupt the global economy. He says we may already be at a breaking point after the Bank of Japan was forced to intervene in the foreign exchange market for the first time since 1998.
By the way, cryptocoin.comAs you follow from Sterling has collapsed. The pound fell to its lowest level since the mid-1980s against the US dollar. This is why many market analysts think the Bank of England may have to support the currency.
However, Minter refers to the worsening of global economic conditions. Therefore, he states that it will be difficult for the Federal Reserve to maintain its aggressive monetary policy stance. Based on this, he makes the following assessment:
The Federal Reserve has already made a policy mistake. We are waiting to see how bad the impact will be. A lot of people are waiting for something to break on the sidelines. They will turn to gold when they see it broken.
“All commodities suffer from low stocks”
Along with gold, Minter is bullish on the broader commodity index. He adds that an enormous supply and demand imbalance in commodities such as base metals, energy and agriculture would make them relatively immune to a global recession. It is possible that a contraction in the world economy will reduce the demand for raw commodities. However, he argues this will not be enough to affect systemic supply problems. Minter explains his views as follows:
All commodities suffer from low stocks. Weak investment in future production means these stocks won’t be replenished anytime soon. Look at aluminum, there is no aluminum anywhere in the world. This also applies to copper. It doesn’t matter where you look. There are supply constraints all over the world.
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