Hold Gold Through Thick And Thin; Another Crisis Is Around The Corner – Murenbeeld
Gold prices could have further room to fall ahead of a looming interest rate hike in one month and continued push for President Donald Trump’s tax reforms and deregulation proposals; however, one analyst still sees potential for the metal throughout the year.
In an interview with Kitco News, Martin Murenbeeld, president of Murenbeeld & Co. said that he is comfortable with gold at current levels or even lower as he expects continued financial and geopolitical uncertainty to support the yellow metal for the rest of the year.
“I’m going to hold my position and just wait for the next crisis to hit,” he said.
In the near-term, Murenbeeld said that gold faces two major headwinds: higher interest rates and looser fiscal policies. These two factors will continue to drive the U.S. dollar and bond yields higher.
“The good news for gold is that none of this may happen because we just don’t know what is going to happen. Trump put out his tax reform proposal but it was more of a wish list than a proposed legislation,” he said. “We will have wait and see what Trump can actually get through Congress.”
Although gold is 5% down from its five-month highs seen last month, Murenbeeld said that gold is still managing to find support at higher levels. He added that this is because investors see value in holding a core positioning in gold as uncertainty continues to simmer in the background.
“In a model we ran, we saw gold get a $40 or $50 bump from the Syria conflict and the French elections. Now that things are calming down that has been deflated and gold is coming back to a fundamental bedrock,” he said. “Even though you are getting a surge in ETF buying and then a surge of selling after a crisis calms down, on average there is still a gain. In an advisory capacity, I would say hold a core position in gold through thick and thin.”
As to what could be the next crisis, Murenbeeld said that he is watching to see if Trump can get all the tax reform that he was hoping for, if the U.S. economy continues to weaken in the second quarter or tensions escalate between North Korea.
With markets betting on perfection from Trump, Murenbeeld said that anything less from the new president would be messy for equities and in turn good for gold.
“I have argued that President Donald Trump is going to be good for gold. He is unpredictable and that is creating all this uncertainty,” he said.
Turning to the Federal Reserve, Murenbeeld added that even if interest rate hikes remain a headwind for gold, investors still need to remember that real rates, will remain low for a long period of time.
“I don’t think the Fed is going to get ahead of inflation,” he said.
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