Gold: Mark Mobius Thinks Golden Years Are Ahead


Aug. 20 2019, Published 1:24 p.m. ET

On Tuesday, BNN Bloomberg reported that veteran emerging markets fund manager and investor Mark Mobius endorsed gold.

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Mark Mobius advises buying gold at any level

In an interview, Mobius said, “Gold’s long term prospect is up, up and up.” Mobius endorsed the precious metal in the past. Last month, Mobius said that he loves gold and batted for increased allocation to the precious metal. He predicted that gold (GLD) might top $1,500, which came true. The commodity traded at $1,514.5 at 8:45 AM ET. Ray Dalio said that gold is an “effective portfolio diversified” in the current conditions.

Why gold?

Mobius cited falling interest rates and the emergence of new currencies as reasons behind his bullishness for gold. The European Central Bank will likely provide stimulus to boost growth, especially after dismal German GDP data. The BoJ (Bank of Japan) will likely provide stimulus to boost the economy. Last month, the BoJ kept the interest rates unchanged at 0.1%. The Fed is under increasing pressure to loosen its purse, especially from President Trump. On Monday, President Trump asked for at least a 1% rate cut from the Fed. Low interest rates mean lower bond yields, which impacts bonds’ (TLT) desirability.

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The equity market seems to be in the late uptrend. Markets have been volatile lately due to sentiments related to the trade war. JPMorgan Chase (JPM) already warned about a market crash this quarter. JPMorgan Chase and Bank of America are still cautious even after the recent fall in equities. The S&P 500 (SPY) fell from its all-time high. The index fell 0.55% at 9:54 AM ET. The Nasdaq (QQQ) was trading 0.47% lower.

With stocks and bonds under pressure, alternative assets could offer return potential and diversification benefits. Gold is a safe-haven asset. As a result, the precious metal benefits from volatility and market downturn.

Cryptocurrency angle

According to Mobius, the emergence of cryptocurrencies could also drive gold’s rally. Bitcoin and other cryptocurrencies will fuel the money supply and create demand for hard assets like gold (IAU). Bitcoin rose due to the launch of Facebook’s (FB) libra. Since then, bitcoin has remained sideways. Facebook’s libra is under fire from lawmakers, President Trump, and the Fed. The underlying assumption about cryptocurrencies fueling gold’s demand might be flawed. The long-term correlation between bitcoin and the precious metal hasn’t proved that hypothesis. Regarding cryptocurrencies’ prominence, a lot of things are still in the air. The regulatory framework isn’t in place. Also, cryptocurrencies aren’t mainstream yet.

How are stocks doing?

Barrick Gold (GOLD) rose 1.1% at 10:55 AM ET. So far, the company has returned 35.2% this year. If Mobius is right about the precious metal’s rally, the stock could see more upside.

AngloGold Ashanti (AU) rose 5% at 11:04 AM ET. Harmony Gold’s CEO is looking into the company’s assets, which fueled the stock rally.


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