This month’s expert panel is (pictured from left to right) TB Amati’s George Lequime, TAM Asset Management’s James Penny, Mirabaud Wealth’s Paul Whelan and Shard Capital’s Ashley Boolell
The fund manager’s view
Georges Lequime, portfolio manager, TB Amati Strategic Metals Fund
The widely anticipated moderation in the headline rate of inflation, and the peak we expect to see in the interest rate hike cycle over the coming months, will propel the gold price higher – in all likelihood, to new all-time highs.
The price started recovering strongly late last year in anticipation of the interest rate cycle peaking, only to pull back more recently when the market realised one or two rate hikes might be in store over the coming months. In our opinion, the next interest rate hike is likely to be the last in this cycle.
Thereafter, given high debt levels and signs of a slowing economy, the Federal Reserve could cut US interest rates faster than the fall in inflation over the coming year or two, in a bid to prevent further bank failures and corporate bankruptcies. This would push real yields back towards 0% again.
The wildcard is the US’s relationship with China. Any further deterioration there could lead to higher domestic inflation for the US and a real possibility the US slips into recession in the latter part of the year, which would force the Fed’s hand with regard to the timing of interest cuts.
It is very difficult to bet against a higher gold price in 2023 and 2024 given the geopolitical events that are unfolding, the aggressive accumulation of gold by China and India as they attempt to move away from the US dollar as a reserve currency, and the possibility of a recession in the west.
Since 2000, the gold price has appreciated 9.4% per year on average in US dollar terms and 9% to 11% a year in other currencies. Other than the past two years, there are only four years since the year 2000 in which the gold price fell in US dollar terms.
See June’s issue of Portfolio Adviser for comments from James Penny, Paul Whelan and Ashley Boolell
