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For gold (XAUUSD:CUR) to move higher in the short-term, the economy needs to continue to decelerate, with low inflation or a pull back in the market rallies, said Ryan McIntyre, senior portfolio manager at Sprott, which has $28B in assets under management in precious metals and energy transition materials.
The gold spot price (XAUUSD:CUR) reached an all-time high on Friday, surpassing 2,195, up 7.23% from the previous month, up 5.65% year-to-date, and up 20.16% from a year ago.
“I think it all has to do with expectations of interest rates,” said McIntyre. “People have been looking for signals that the Fed might be starting to cut rates [in June].”
In addition, deceleration in U.S. manufacturing activity kicked off the rise in gold (XAUUSD:CUR), he said. Investors want assets that are possibly uncorrelated to the U.S. equity market.
Global central banks have also bought gold in order to diversify their portfolio of foreign exchange reserves integral — China is an example.
“It’s a diversification away from any foreign currency,” said McIntyre. “What they’re really trying to do is to reposition themselves to have a wide range of possibilities, whether it is for economic activity or to [mitigate] geopolitical tensions that might continue to arise.”
He also said that it is advisable to be positioned in gold “at least partially,” given where the U.S. equity markets are, “you’re looking at very high valuations.”
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