The Financial Times published an interesting article today in which Diego Parrilla, author, investment expert and precious metals specialist, outlines the positive case for gold and why the gains seen this year are just the beginning of a new gold bull market:
Parrilla begins:
“Gold prices have rallied more than 30 per cent since the lift-off in US interest rates in December. A sharp reversal in pricing, sentiment and positioning driven by a myriad macro and micro factors has left the gold bears and bulls as polarised as ever.
The bearish camp, which has featured prominent and respected analysts like Goldman Sachs, tends to have a constructive view on the US dollar, the ability to raise interest rates, normalise global monetary policy, and generally a benign view on the global economy and inflationary risks.
The bullish camp, which I subscribe to, tends to have a more pessimistic view on the global economy and the unintended consequences of monetary policy without limits, and sees the recent price action as the beginning of a multiyear bull run in gold.
My view that there is a perfect storm for gold is based on three closely interrelated dynamics, whereby central banks and global markets are both testing the limits of monetary policy and credit markets as well as the boundaries of fiat currencies.”
He concludes:
“Time will tell if central banks and governments will be able to engineer a smooth solution to the challenges ahead, or if the remedy will be worse than the disease.
Monetary policy without limits will lead to a very wild and bumpy ride and a larger crisis than the one we have been trying to resolve: a perfect storm for gold.”
Read the FT article here