George Soros return to active investing, particularly his bearish bets against the market and bullish stance toward gold, has gotten a lot of press this month.
And he’s not the only wealthy financial guru bracing for the worst with gold. Two Barrons Roundtable members DoubleLine Capital bond guru Jeff Gundlach and Zulauf Asset Management head Felix Zulauf both see at least another $100 gain for the metal.
Gold could rally to $1,400, Gundlach said in Barrons midyear update, while Zulauf concurred, adding, I am bearish on equities and constructive on high-quality bonds. Also, I expect gold to rally this year to $1,400.
Very dangerous time, billionaire says: And Elliott Management chief Paul Singer just gave an interview in which he detailed his pessimistic outlook on the economy and the necessity of gold amid today’s imbalances.
The cure for the crisis for the debt crisis, the financial crisis has been deemed by the developed world governments to be more debt, Singer told Institutional Investor in May. There has not been a deleveraging. And after seven and a half years and counting of this mix of policies, at the moment were either in a stage of stagnation or rollover, possibly in the early stages of a global recession. So I think its a very dangerous time in the financial markets.
Noting that if the Federal Reserve raises interest rates without fiscal and governmental reforms, an instant recession would result, Singer likes financial insurance in his portfolio.
Gold is under-owned, Singer confirms: Were very bullish on gold, which is the anti-paper money, of course, and is under-owned by investors around the world, he said. And we are very skeptical about markets. We hedge every equity position. Were not in the mood to be surprised surprised in the sense of losing large amounts of money ever, but in particular now with this extraordinary and unprecedented situation where the stability of financial markets is so dependent on confidence in policymakers and central bankers.
Soros has dabbled in gold throughout the years, and Singer and Zulauf have been consistently bullish in recent years. But as economic uncertainties grow, even former gold skeptics are turning to the metal for safety. Were getting a bit bullish, Charles Newsome of Investec Wealth told CNBC. Having been pretty nervous about it for the last two and a half years or so, we’ve seen a turnaround in the gold price, a bit more strength in it. We’ve looked at gold again. It has always been an insurance asset for us. But with so many fears around, starting with Brexit and on and on, competitive devaluations by major central governments of their currencies, and exchange control from the Chinese gives us the feeling that gold might be a good place to put a small part of your portfolio.
6 events that could pay off for gold: Mohamed El-Erian hasnt been a gold cheerleader, either, but in a recent Bloomberg column, the Allianz SE chief economic adviser (and former PIMCO bigwig) outlines 6 events that could make Soros a winner.
- Brexit: A vote in favor of the U.K. leaving the European Union in the June 23 referendum could have a disruptive impact on markets, El-Erian writes.
- Chinas debt bubble: A major slip by China as it tries to implement financial policies aimed at balancing liquidity support for the economy with the orderly management of a credit boom, soaring internal corporate indebtedness and excesses in the equity markets.
- U.S. presidential election, specifically Donald Trump: Indications that the isolationist tone of the U.S. presidential primaries is more than just rhetoric and posturing, but signals a decisive change in decades of U.S. leadership for economic and financial globalization.
- Currency volatility and manipulation: Large exchange rate moves that, by reflecting wider divergences in the worlds multi-speed economic and policy conditions, spread volatility to financial markets as a whole.
- European banking woes: A renewed scare about the European banks that have lagged in raising capital and strengthening internal operating approaches and have yet to put behind them the legacy of a period of excessive risk-taking.
- Reckless investing fueled by low interest rates: Greater risk aversion among market participants who acting on their confidence that central banks are prepared to continuously step in to ensure stability now have taken on significant mismatches of maturities, assets to liabilities, benchmarks or currencies in their search for higher returns. And this is occurring in markets that have tended to experience periodic bouts of relative ill-iquidity.
With gold at six-week highs and seemingly on the move back toward $1,300 as of Tuesday thanks to rising Brexit fears, investors should continue to brace for black swans as well as the potential risk events outlined above.