Gold News

'Buy Gold' Advise Investing 'Legends' But Price Falls as Euro Inflation Hits 10-Year High

GOLD PRICES fell from last week's 4-week closing highs as London re-opened Tuesday from the UK's late-summer Bank Holiday as new data put inflation in the Eurozone at the fastest in 10 years and two "legendary" asset managers advised investors to buy gold for protection.
 
Trading down to $1810 per ounce as the Dollar continued to slip following Fed chairman Jerome Powell's non-event speech on QE tapering Friday, the price to buy gold dropped €10 for Euro investors to €1530 per ounce – a new all-time record high in February 2020 when the Covid economic crash and deflation first hit.
 
Compared with a year ago, the harmonized index of consumer prices for the single currency's 340 million citizens has jumped by 3.0% this month, says Eurostat's first estimate today, steeply above July's 2.2% annual inflation.
 
Energy costs have risen by more than 15% per year, while industrial goods now cost 2.7% more than in August 2020 and unprocessed food jumped 2.9%.
 
Prices for services in contrast – now accounting for two-fifths of the 19-nation currency union's consumer-price basket – rose only 1.1% per year.
 
That put the so-called 'core' rate of inflation, excluding fuel and food, at 1.6%.
 
Headline HICP has now matched or breached the European Central Bank's upper target of 2.0% in 22 of the last 120 months, 16 times in 2011 and 2012 and then 4 times in 2018.
 
The ECB now expects an almost certain overshoot as it tries to counter the Covid pandemic and structural deflation with negative interest rates and ongoing QE asset purchases.
 
"Currency devaluation globally is going to be quite significant next year given the incredible amount of money supply that has been printed," says Mark Mobius – a "legendary investor" according to the internet – speaking to Bloomberg.
 
"10% [of investing portfolios] should be put into physical gold."
 
"As inflation picks up, the logical place to go is gold," agrees former hedge fund manager John Paulson – also a "legend" apparently and also speaking to Bloomberg this weekend.
 
"Because the amount of money trying to move out of cash and fixed income dwarfs the amount of investable gold, the supply and demand imbalance causes gold to rise."
 
Charts of relative performance for investing 'legends' Mark Mobius and John Paulson
 
"It is going to be very, very good to have physical gold that you can access immediately without the danger of the government confiscating all the gold," says Mobius, whose flagship investment trust – focused on emerging and 'frontier' markets (LON: MMIT) – has closely tracked the wider MSCI Emerging Markets index for UK investors since floating on the stock market in 2018.
 
John Paulson's main fund, in contrast, has dramatically underperformed both the main US stock market and also its peers among hedge funds since the early 2000s' gold bull market ended a decade ago, according to TipRanks.
 
Having run the world's 4th largest hedge fund at its 2011 peak of $36 billion, Paulson switched to managing primarily his own money as a family office in 2020 following a run of poor performance and investor exits.
 
Reportedly making $20bn from a $1bn bet against the US housing market from 2007 to 2009, Paulson then famously backed his largest fund with shares in the giant SPDR Gold Trust (NYSEArca: GLD), the world's largest gold-backed ETF.
 
That position went sour however when gold prices sank in the 'taper tantrum' of 2013.
 
"I would say that cryptocurrencies are a bubble," Paulson now says, describing such 'digital tokens' as a "limited supply of nothing" while also disparaging 'special acquisition vehicles' (SPACs), another hot sector in 2021 so far.
 
"Cryptocurrencies, regardless of where they're trading today, will eventually prove to be worthless. Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn't recommend anyone invest in cryptocurrencies."
 
With Covid cases rising steeply again meantime, the European Union yesterday removed the US from its list of 'safe travel' countries, a move reciprocated by Washington for Germany overnight.
 
Europe may see another quarter-million Covid deaths by Christmas, a new World Health Organization report said Monday.
 
The UK gold price in Pounds per ounce meantime dropped back to £1312 per ounce Tuesday – like the Dollar and Euro price, virtually unchanged across August 2021 – as UK government debt prices ticked lower, edging longer-term interest rates up.
 
UK and Eurozone stock markets fell, as did energy and industrial commodity prices.
 
Finding over half of its annual end-user demand from industrial and technological applications, silver fell harder than gold prices, sinking through $24 to show a loss of $1.50 per ounce from the start of this month.
 
"Focus now on Friday's [US] jobs data [for August]," says one bullion desk in a trading note.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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