Investors should have used gold’s month-long pullback, culminating in a four-month low as a buying opportunity, according to one major precious metals portfolio manager.
John Hathaway, senior portfolio manager at Tocqueville Asset Management, was fairly critical of positive sentiment surrounding further U.S. economic growth, which has led to complacency in financial markets, resulting overvalued equity valuations.
“We believe that the Fed’s view of economic activity is not rooted in reality and that its stubborn pursuit of interest-rate hikes is likely to precipitate a bear market in equities and bonds,” said Hathaway in his recently published second quarter gold strategy investor letter.
Hathaway’s comments come as gold has managed to bounce off its recent lows, reclaiming an important psychological level at $1,220 an ounce. Hathaway added that he remains optimistic on gold and the precious metals mining sector as he expects the U.S. economy will be able to sustain its momentum as the Federal Reserve continues to tighten monetary policy.
In his second-half outlook, Hathaway said that he expects as the Federal Reserve continues to tighten market volatility will increase, putting pressure on equity markets and ultimately forcing the central bank back to the sidelines on monetary policy.
“Financial-market complacency seems (inexplicably, to us) to be based on confidence in a continuing economic expansion and a smooth transition (meaning pain-free in terms of market damage) to normalization of monetary policy and interest rates. We believe that these two expectations are incompatible and unattainable simultaneously,” he said. “An unexpected U-turn in monetary policy would almost certainly cause precious metals prices to surge.”
Reference: Kitco
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