Bloomberg: Gold Will Likely Soar To A Record
Within Five Years

“Gold will likely soar to a record within five years as asset bubbles burst in everything
from bonds to credit and equities, forcing investors to find a haven”, reported
Bloomberg last week, quoting Old Mutual Global Investors’ Diego Parrilla.

The metal is at the start of a multi-year bull run with a “few thousand dollars of
upside” in a world of “monetary policy without limits” where central banks print lots of
money and low or negative interest rates prevail, said Parrilla, who joined the firm as
managing director of commodities last month. He’s worked at Goldman Sachs Group Inc. and
Bank of America Merrill Lynch.

“As some of the excesses in other asset classes get unwound, gold will perform very
strongly,” said 43-year-old Parrilla, who has almost 20 years experience in
precious-metals markets. The “perfect storm scenario will mean that gold will perform
best when other classes are doing worst.”

While gold has climbed 24 percent this year amid low or negative rates, it slumped more
than 40 percent from its record in 2011 through the end of last year to what Parrilla
called “very oversold, very distressed” levels. With the downside only a few hundred
dollars, the risk-to-reward ratio is extremely asymmetric and skewed to the upside, he
said in an interview on Sept. 14.

In the first of two monetary-policy announcements on Wednesday, the Bank of Japan shifted
the focus of stimulus from expanding the money supply to controlling interest rates,
which some economists deemed as further evidence that BOJ policy had reached the limits
of its effectiveness. The Federal Reserve is also due to make a policy decision, with
traders seeing the probability for an interest-rate hike at only 22 percent.

Bloomberg: Gold Rising to $4,000
An Ounce ‘Would Not Be an Unreasonable Move,’ Fund Manager Says

Stocks and bonds may be in an asset bubble, as record-low interest rates
and a tremendous increase in the money supply have sent prices soaring this year. Add
gold, which has risen 35% to $2,049 an ounce Aug. 5, to the list.

But Michael Cuggino, CEO of the Permanent Portfolio Family of Funds,
says gold can move a lot higher. It would “not be an unreasonable move” for gold to
breach $4,000, he said in an interview.

A long wait for a big move

First, take a look at this chart showing how monthly prices for an ounce of gold (per
continuous gold contracts on the New York Mercantile Exchange) have moved over the past
30 years:

You can see the triple bottom from the end of 2015 through November 2018.

“Ever since then, it has been gradual move up, then some down. It moves sometimes in big
chunks, gives some back, sits around and does nothing, reacts to stimulus, inflation,
the value of dollar and euro … but it has had an aggressive move this year,” Cuggino
said.

Gold may extend gains as money is being pumped into the U.S. economy, the dollar is
declining, and investors are fearful that inflation may return, he said.

Cuggino warned of pullbacks even during a long-term move up, as did Nigam Arora, who
wrote that gold is an appropriate hedge against stocks.

The case for gold being relatively cheap

When looking back at how gold and stock prices have moved over the very long term,
Cuggino said gold is still trading at an inexpensive level when compared with stocks.

Different crisis, different response

Cuggino said the quick and tremendous reaction to the COVID-19 pandemic by the federal
government and the Federal Reserve was completely different from the actions taken
during and after the 2008 credit crisis.

“In 2008, the fiscal policies didn’t matter much for economic gain. GDP didn’t grow
because of stimuli. Monetary assistance from the Fed basically stayed in the banking
system,” he said.

But now, because of programs meant to help small business, the payments made to
individuals and families through the CARES Act and the loan payment deferral programs,
stimulus is “much more targeted to get money out to consumers,” Cuggino said.

This points to a long-term concern and bullish possibilities for gold

“Even though we have deflation now, eventually with excess raw materials, in a growing
economy, the velocity of all that money can produce inflation risk,” he concluded.