- Even as gold prices close in on record intraday highs, Mark Mobius expects the precious metal to rally further.
- The popular safe-haven investment climbed at the start of the summer as a resurgence of US coronavirus cases and fears of a prolonged recession drove investors to safe havens.
- With interest rates sitting near zero and uncertainty looming over markets, “gold is an attractive medium to have,” Mobius said. “I would be buying now and continue to buy.”
- Gold could rally even further if the coronavirus disrupts mining activity and the global supply chain, Mobius added.
- Watch spot gold trade live here.
Spot gold only needs to gain about 1% for it to set a record intraday high. But Mark Mobius, co-founder of Mobius Captial Partners, still sees a buying opportunity for the precious metal.
Gold prices have skyrocketed in recent weeks as rising coronavirus cases and expensive stock valuations entice more investors to hedge for a correction. The metal’s rally has also been fuelled by unprecedented easing. Near-zero rates, forecasts of heightened inflation, and central bank asset purchases bolstered gold’s value against the dollar through 2020.
Expectations for a lengthy economic recovery and lasting virus damage make the case for buying gold even stronger, Mobius said Friday.
“When interest rates are zero or near zero, then gold is an attractive medium to have because you don’t have to worry about not getting interest on your gold, and you see the gold price will rise as uncertainty in the markets are rising,” he said on Bloomberg TV. “I would be buying now and continue to buy. Gold is really on a run I think.”
The commodity tore above its previous record close on Thursday and maintained its upward trend in Friday trading. Gold now sits roughly 25% higher year-to-date.
The metal’s rally accelerated in recent weeks as new economic risks arose. New virus hotspots across the US led several states to reinstate lockdown measures. Economic data covering the first weeks of July show consumer sentiment and spending activity worsening after May and June improvements.
Most recently, new tensions between China and the US revived fears of a tit-for-tat conflict between the economic superpowers. Mobius sees traders heeding the risks and turning to gold in case the economic backdrop sours further.
“We’re in a very interesting situation where people are looking at stocks to preserve their capital – because stocks will adjust to inflation – and also gold. So they’re sort of hedging their bets,” Mobius said.
The legendary investor sees supply constraints potentially driving gold prices even higher. Gold mines were likely affected by the pandemic. With demand for the popular hedge soaring around the world, supply chain disruptions could benefit those who buy early enough, Mobius said.
“With this COVID, I assume that mine outputs should be declining for gold. That of course puts additional pressure upwards on the price,” he said.
Spot gold traded at $US1,902.22 per ounce as of 11:05 a.m. ET Friday.
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