Gold is undervalued and could be pushed higher by dedollarization, said Bridgewater’s co-CIO.
“This geopolitical turmoil is not going away. This is slow secular support for gold,” Karen Karniol-Tambour said.
Inflation will also keep interest in gold high, she said at the Sohn conference on Tuesday.
Gold could be at the start of a period of sustained growth as global dedollarization trends continue, said Bridgewater Associates co-CIO Karen Karniol-Tambour.
Gold has always been attractive when interest rates are falling, but she believes the precious metal now has more to offer, setting it up for a bullish outlook.
“Gold is undervalued. There’s a long way to go,” she told Sohn’s conference on Tuesday, according to Kitco News.
It comes as some countries seek to reduce their dependence on the US dollar, which dominates international trade and is traditionally considered a mainstay reserve asset for central banks.
But Western sanctions against Russia that froze its foreign currency reserves highlighted the risks of using the dollar. And since Russia’s invasion of Ukraine, more and more countries have turned to the Chinese yuan or other non-dollar currencies to strike trade deals.
Meanwhile, gold purchases by central banks have soared in recent quarters as they rush to store it in their reserves.
Karniol-Tambour said it also has the potential to change investor sentiment towards gold, namely its perceived opportunity cost as a non-performing asset.
“This geopolitical turmoil is not going away,” she said. “This is slow secular support for gold.”
Meanwhile, with inflation still relatively high in global markets, gold is poised to continue to attract investors as a hedge against the erosion of purchasing power.
Consumer inflation in the United States has slowed markedly from the peak of 9% reached last June. But the most recent CPI data for April puts inflation at 4.9%, still well above the Federal Reserve’s 2% target.
“The fact that inflation is so volatile increases the likelihood that you will get a version of a debasement event where you lose your true purchasing power,” Karniol-Tambour said.
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