Gold hit a six-year high earlier this month as hopes rose that the Federal Reserve and other global central banks would ease policy to support growth that has been impacted by the ongoing trade war between the U.S. and China.
But it is now setting up to finish its worst week in nearly five months as the lack of clarity from the Federal Reserve on the outlook for interest rate cuts triggered investors to cash in on some gains ahead of Fed chief Jerome Powell’s speech in Jackson Hole on Friday. The precious metal is currently down to $1,496.20 per ounce.
But even as gold slips lower, veteran investor Mark Mobius issued a blanket endorsement for buying the precious metal.
Mobius says that accumulating bullion will reap long-term rewards as global central banks loosen monetary policy and as the rise of cryptocurrencies reinforces the demand for genuine assets.
“Gold’s long-term prospect is up, up and up, and the reason why I say that is money supply is up, up and up,” Mobius said to Bloomberg. “I think you have to be buying at any level, frankly.”
And as the inverting yield curve between the broadly watched 2- and 10-year notes sends an ominous signal that a recession may be on the horizon, investors have been running to bullion-backed ETFs.
“With the efforts by the central banks to lower interest rates, they’re going to be printing like crazy,” Mobius, who opened Mobius Capital Partners last year after three decades with Franklin Templeton Investments, said.
As signs that a global slowdown has already started, central banks have been easing policy and boosting accommodation. The Fed cut its benchmark rate by 25 basis points at its meeting last month and is widely expected to reduce rates again at its September meeting, while China has also delivered targeted support.
“I think we are going to see lower rates in China and elsewhere,” Mobius said. He recommends allocating around 10% of your portfolio to physical bullion.
As for if the rising popularity of digital currencies like Bitcoin will detract from physical assets like gold, Mobius believes the rise of cryptocurrencies will actually boost demand for the metal.
“You have all these currencies, new currencies coming into play,” Mobius said. “I call them ‘psycho currencies,’ because it’s a matter of faith whether you believe in Bitcoin or any of the other cyber-currencies. I think with the rise of that, there’s going to be demand for real, hard assets, and that includes gold.”