(Kitco News) Gold has the potential to double once the Federal Reserve begins to tighten and raise rates to fight higher-than-expected inflation, said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
“If you adjust gold to its 1980 high, it can go up to $ 2,500, it can go over $ 3,000 and up,” Boockvar told Michelle Makori, editor of Kitco News. “Money… can go back to its highs of $ 50 and more. Name an asset that is down 50% from its all-time high. I can’t really think of much other than money. “
Boockvar is bullish on precious metals due to its inflation and slower growth outlook. “Inflation is not transitory. And that will be the most important thing in determining the direction of the economy and the markets. I don’t expect a return to pre-COVID levels, ”he said.
This persistent inflation is what is forcing central banks around the world to start tightening. And the next big step will be the rate hike. And this has major implications.
“We are now on the cusp of a global tightening, and even a frosty one, it is going to have major repercussions,” he explained. “Since 2010, every significant market correction has coincided with the end of QE. So I’m not going to kid myself and think that the Fed and the other central banks are going to tighten up, and there won’t be a problem. “
The Federal Reserve has made it clear that it will start declining in November, with the CME FedWatch Tool now anticipating a 43% chance of a rate hike as early as June.
However, the obstacle for the Fed is its lagging behind the curve, added Boockvar. “You have the most intense inflationary pressure since the 1970s. And the Fed is going to do seven months of gradual reduction, and the rates will still be at zero,” he said.
This is why Boockvar sees nothing more convincing than investments in gold and silver. Both metals have found their bottom and are ready to resume their bullish rallies, he said.
“Gold and silver bottomed out in December 2015, just as the Fed started raising interest rates for the first time in seven years. Gold rose with interest rates in the 1970s. The fed funds rate in the mid-2000s went from 1% to 5.25%, and gold doubled, ”he said. note.
The gold mining industry is also a winning profession at the moment. “Minors are very cheap, and they are not respected [despite] pay healthy dividends, ”Boockvar said. “When we think of the good mining companies that have sustainable all-in costs of $ 800 or even $ 900, and they can sell gold for $ 1,800, that’s a pretty big profit margin that these companies don’t have. not. It had been a while since a long time. “
Watch the video above to find out why Boockvar thinks the economy could “stagnate” in the third quarter. Follow Michelle Makori on Twitter: @MichelleMakori (https://twitter.com/MichelleMakori).
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