Good news is serving as bad news for gold, which is beating the S&P 500 year to date but is retreating this week as fears about Europe’s future ease and the Trump tax plan sharpens investor appetite for risk assets.
But one top gold strategist believes the precious metal is well positioned to extend its solid run in 2017 and beyond. Another gold investing pro is bearish on gold in the near term and recently sold his gold position in an ETF-based portfolio strategy.
Who’s right? In recent phone interviews with IBD, these investing experts shared their views on gold’s moves so far this year as well as on the case for and against investing in gold in the months ahead.
Chuck Self offers response on:
Chuck Self, CIO of iSectors, a firm with a long track record of investing in ETFs, holds a glum view on gold in the near term.
A sluggish GDP outlook, coupled with recent increases in short-term interest rates, do not bode well for the metal, in this money manager’s view.
“The risk is the Fed is going to raise rates too high and push the economy to zero growth,” Self said. “That’s not going to be good for gold, that decreases inflationary expectations.”
He also pointed out that the second quarter is a seasonally weak season for gold, with the jewelry gift-giving season many months away.
In January, iSectors sold the gold ETF position in its flagship Post-MPT Growth Allocation strategy, missing out on gold’s rally this year. The firm, which also offers a Precious Metals Allocation strategy, has no regrets about that sell decision.
“I take this as a false rally that will not lead to a new bull market in precious metals,” Self said. Still, he thinks a better opportunity to get back into the gold market could arise later in the year.
The Post-MPT Growth strategy is overweight utilities — a sector that tends to do well as inflation falls and that is now the No. 1 weighting inside the portfolio.
Investment banker Goldman Sachs (GS) also warned investors recently that gold could come under further pressure over the next three months if President Trump delivers promised tax reforms. The firm has a near-term target of $1,200 an ounce.
On Wednesday, Trump unveiled a sweeping tax plan. In contrary reactions, stocks ended the session lower after the news while gold gained, on potential bargain-hunting or short-sellers’ profit-taking after recent declines.