The gold market is struggling to bring in bullish momentum as prices go higher than $1,800; however, the precious metal still has greater support from some billionaire investors.
This week John Paulson, who is the president at Paulson & Co and Mark Mobius, who is the founder of Mobius Capital Partners, both made news for their bullish calls on gold.
During an interview with Bloomberg, Paulson reported that he prefers gold to bitcoin and that Gold looks attractive given the inflationary environment.
“Gold does very well at times where we see inflation,” he said. “The last time it went parabolic was back in the 70s when we saw two years of double-digit inflation.”
Paulson said that gold could go “parabolic” since it is relatively small when compared to the total financial market.
“If you have long-term Treasury bonds that are giving a yield of 2% and interest rates go up to 5%, those bonds go down materially in value. Likewise, if you have USD sitting in a bank account that you are earning 0% on and then inflation is 4%, you are gradually eroding your money,” he stated in his interview.
“As inflation gets worse, people will try to get away from fixed income. They get out of USD. And the logical place where they will go is gold,” he said. “Because the amount of funds to get out of USD dwarfs the total of investable good, the imbalance of supply and demand causes gold to increase and the more it goes up it sort of feeds back on itself and has the possibility to go parabolic.”
Meanwhile, in a different interview with Bloomberg, Mobius reported that investors should keep 10% of their portfolio inside gold.
He said that he also views the value of gold as being purchasing power of fiat continues to go down.
“Currency devaluation globally will be quite significant over the next year given the great amount of money supply that was printed,” he stated. “It will be very, very good to own physical gold that you can get to immediately without any danger of the government confiscating this gold.”
Author: Blake Ambrose