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MarketWatch: Money Managers No Longer Hate Gold, Claim It's Undervalued

MarketWatch: Money Managers No Longer Hate Gold, Claim It's Undervalued

 (Getty/Sam Panthaky)

By    |   Wednesday, 15 February 2017 01:17 PM

Some of the world’s biggest and most powerful money managers have taken a shine to gold.

“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,” MarketWatch explains.

“They’re worried about inflation, stagflation and global protectionism, and they think gold is the best insurance against all three,” MarketWatch explained. “And at less than $1,300 an ounce, they also think, for only the third time in a decade, that it is undervalued.”

Now, what should the savvy investor make of that?

With the stock market seemingly setting new record highs each day, why would anyone think you’d need any sort of investment safe haven? As MarketWatch explained, many respected economic gurus predict the current bull market will only continue to charge into new record terrority. BofA sees another 10% gain on the market before the run ends.

“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. But currencies are a zero-sum game. The one that can’t be devalued by central bank activity is gold,” Brett Arends explained.

“The second biggest is surely uncertainty itself. You do not have to be a critic of the current president to accept that he introduces a massive amount of uncertainty into governance and policy. (His biggest supporters like him pretty much for that reason.),” he said.

“In this scenario gold is an insurance policy rather than an investment mainstay. So-called “gold bugs” typically hold a lot of their portfolio in the metal, sometimes a third or more. Professional money managers typically hold nothing. Holding 5% or 10% of your portfolio in gold doesn’t seem unreasonable.”

For his part, Frank Holmes, CEO and chief investment officer at U.S. Global Investors, says investors are buying gold by relying on simple investment-related math, USA Today reported

Holmes also explained that investors are also bracing for unsavory ripple effects if Trump’s plan to slap tariffs on U.S. trading partners like China hurts U.S. consumers by resulting in higher prices of imported goods sold at U.S. stores such as Walmart, Target and Home Depot.

“The collateral damage could be massive to economic growth,” Holmes says.

Holding gold – which does not pay interest – has become more attractive due to the combination of lower bond yields and higher inflation readings, Holmes told USA Today.

“When the real interest rate -- the rate of interest on, say, a 5-year U.S. government bond minus inflation – shrinks or turns negative as it has done lately, investors tend to buy gold as they're not missing out on the yield benefit of bonds,” USA Today explained.

However, not all economic gurus are in agreement about how buying gold fits into the brave new world of a Trump presidency.

"We’ve seen some market strategists recommend owning gold in the event that Trump causes World War III. Unlike potassium iodide, gold isn’t an antidote to radiation exposure," Newsmax Finance Insider Ed Yardeni recently explained.

"But it might provide great protection from a number of lesser calamities that Trump’s detractors believe he might cause, including a global trade war or a domestic civil war," Yardeni wrote.

"Our new president has hit the ground running, but there’s probably more mud than he expected," Yardeni wrote.

"Gold might rally if he stumbles badly. Or else it might rally because Trump’s policies boost economic growth, as he promised. If so, the rebound in commodity prices that started at the end of 2015 may continue."

Dr. Ed Yardeni is the President of Yardeni Research, Inc., a provider of independent global investment strategy research.

(Newsmax wire services contributed to this report).

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MarketWatch says the world's biggest and most powerful money managers have taken a shine to gold.
Money Managers, Gold, Invest, MarketWatch
Wednesday, 15 February 2017 01:17 PM
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