One fund manager says recession fears amid global-economic slowdown sign actually give savvy investors a golden opportunity to start investing in a precious metal commonly considered a haven amid uncertainty.
Will Rhind, CEO of fund management company GraniteShares ETFs, recently told CNBC that he sees gold at a very affordable price now.
“You’ve had a bit of a V-shaped recovery in the market, but [with] gold prices selling off, this could well be a buying opportunity for gold at this point,” said Rhind, whose company offers a low-fee, gold-tracking exchange-traded fund called the GraniteShares Gold Trust.
“The world is slowing down,” Rhind said. “That’s a weaker dollar platform in my mind, one of the key things that helps drive gold prices. So, for me, I think: Look at this price and think about defensive positioning,” he said.
Many investors buy into the precious metal via an ETF.
“For a lot of people, the fees will be the most important thing,” Rhind said. “I think a lot of people will focus on that, as they rightfully should, because low fees are important. But we also added other differentiators, like holding the gold in a different location to other ETFs [and] having audit checks two times a year, for example, into the vault where we send people in and actually check the bars.”
And with demand for gold picking up in places like China, where inflation is driving investors toward the historically safe yellow metal, and huge mergers by gold companies centralizing the supply, prices might not stay low for long, Rhind warned.
“Companies can’t find these big new gold finds out there, so they’re buying each other’s capacity, and so that’s why you’re seeing these mega mergers going on in the space,” he said. “And ... we don’t have to talk about peak gold, but what we’re saying is there are no major new discoveries, and therefore supply is going to be more constrained.”
To be sure, gold prices rose on Friday as weak economic data from the euro zone exacerbated fears of a global slowdown, weighing on risk sentiment and putting bullion on track for its best week in nearly two months, Reuters reported.
Spot gold climbed about 0.3 percent at $1,313.07 per ounce by 1:48 p.m. EDT (1748 GMT), while U.S. gold futures settled 0.4 percent higher at $1,312.3.
The metal was up nearly 1 percent for the week, on track to mark its biggest weekly percentage gain since beginning of February.
“There is some safe demand that has surfaced,” said Jim Wyckoff, senior analyst at Kitco Metals.
“The U.S. Federal Reserve suggested U.S. economic growth was slowing, which has spilled over into notions that the rest of the world economy might be experiencing slower growth. That was highlighted by the PMI data out of the European Union, auguring for some trepidation in the world’s stock markets.”
Businesses across the euro zone performed much worse than expected this month as factory activity contracted at the fastest pace in nearly six years, hurt by a big drop in demand, a survey showed.
“Price action in gold continues to lend strength to our view that expected data deterioration will help spark a gold rally as interest rates continue to fall in the context of a slowing global economy,” analysts at TD Securities wrote in a note.
Earlier this week, the Fed brought its three-year drive to tighten monetary policy to an abrupt end, abandoning projections for any interest rate hikes this year.
Lower interest rates reduce the opportunity cost of holding non-yielding gold and weigh on the dollar.
Gold prices rose to their highest since Feb. 28 on Thursday at $1,320.22. Despite paring some of those gains, they were still on track for a third straight weekly gain, up about 1 percent so far.
“Gold could not break above $1,320 on the upside and saw a correction. The current trading range seems to be between $1,305-$1,320,” said Afshin Nabavi, senior vice president at MKS SA.
“With the geopolitical and the (uncertain) Brexit situation, we may still be heading higher.”
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