Equity Momentum Gone; Time To Look At Gold – Strategist

April 23, 2018

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(Kitco News) – With last year’s equity momentum gone, the best strategy in the marketplace, which is largely ignoring the Federal Reserve’s monetary tightening, is to buy gold, according to one strategist.

“2017 has left the building,” chief investment strategist at 3EDGE Asset Management LP Fritz Folts told Bloomberg earlier this week. “We will definitely have more volatility this year …. And gold can help us there.”

Folts is in charge of overseeing an $800 million portfolio that is embracing a new direction by limiting its exposure to stock-related exchange-traded funds as well as broad emerging-market ETFs, while also shifting its attention to the U.S. and Japanese markets.

The chief investment strategist said that gold is an excellent asset to invest in this year, as it guards against sudden shocks and rising volatility, especially in light of all the trade-war fears rocking the markets. Folts added that his preference is gold-backed ETFs.

Investors have also been picking up on geopolitical risks and buying gold ETFs as security. Bloomberg reported last week that the popularity of gold-backed ETFs was at its highest level since 2013

One of the shining examples was Frankfurt-listed Xetra-Gold —the third-largest commodity-linked ETF — that saw its outstanding shares approach 177 million as of last week, the most since the fund began to trade in 2007.

Gold prices have also been resilient in light of risk-on sentiment present in the marketplace. June Comex gold futures rose on Wednesday as the U.S. dollar index touched a three-week low, with gold prices last trading at $1,354, up 0.33% on the day.

Kitco senior technical analyst Jim Wyckoff described the price action this week as pro-bull: “The chart postures for both [golf and silver] are tilted in favor of the bulls, which is inspiring technically based buying interest at mid-week.…The ability of gold and silver to post price gains today, amid little risk aversion in the marketplace, is impressive.”

A majority of gold analysts are expecting to see higher gold prices in the second quarter of 2018.

TD Securities’ Bart Melek said in a report published on Monday that investors need to get past a more aggressive Fed tightening outlook before traders will see gold break out of its trading range.

“Any sign from the Fed the U.S. central bank is willing to allow inflation to move above target, that the Fed may be making a policy error or that inflation could disappoint given weaker-than expected inflation data will be needed to give gold a lift above the upper bound of the range and toward $1,400/oz,” Melek said.

Another analyst told investors to be patient when it comes to gold, adding that a gold rally is coming soon. 

“ETF buying interest for gold is at its strongest since September 2017.…Once bullish speculative sentiment toward gold resumes, I expect a strong price reaction,” Boris Mikanikrezai, precious-metals analyst at FastMarkets, wrote in a Seeking Alpha post on Monday. “I have a long position in IAU (iShares Gold Trust), expecting a fresh 2018 high in Q2.”

Category: Gold