The co-chief investment officer of the world’s biggest hedge fund has said gold could surge to a record high above $2,000 an ounce as global political uncertainties increase.
“There is so much boiling conflict,” Greg Jenson, who helps oversee over $160bn at Connecticut-based Bridgewater Associates, told the Financial Times.
Jensen cited growing income inequality in the US and rising tensions with China and Iran as some of the uncertainties that could prompt investors to look to so-called safe haven assets.
“People should be prepared for a much wider range of potentially more volatile set of circumstances than we are mostly accustomed to,” Jensen said.
Jensen also told the paper he believed the US Federal Reserve would let inflation run hot for a while, creating the circumstances for higher gold prices as investors turn to the precious metal to hedge inflationary forces.
“There will no longer be an attempt by any of the developed world’s major central banks to normalise interest rates. That’s a big deal”.
The Fed cut interest rates three times in 2019 in a bid to stimulate a slowing US economy.
Jensen told the FT he would not rule out the possibility of Fed chair Jay Powell slashing rates to zero during 2020 in a bid to avoid recession.
He added that gold should remain strong as central banks allow higher inflation, but that this — coupled with a ballooning US budget and trade deficit — could come to threaten the dollar’s position as a the global reserve currency.
“That could happen quickly or it could happen a decade from now,” Jensen said. “But it’s definitely in the range of possibilities. And when you look at the geopolitical strife, how many foreign entities really want to hold dollars? And what are they going to hold? Gold stands out.”
Amid these circumstances, Jensen said gold — which is currently trading around $1,550 an ounce — could gain as much as 30 per cent.
The precious metal hit a seven-year high and broke through the $1,600 barrier last week as tensions between the US and Iran mounted following the US killing of Iranian general Qasem Soleimani and retaliatory Iranian airstrikes on bases in Iraq housing US troops.