The fund manager who predicted for record gains in the precious yellow metal seen last year is of the view that gold is set to spike to fresh highs as the risks pertaining to central banks loosening up the massive stimulus are under-appreciated.
The $250 million Quadriga Igneo fund being administered by Diego Parrilla hails there is not much knowledge on the long-term damage that is resulting to ultra-loose fiscal and monetary policies. Artificially low interest rates have created asset bubbles that are too big to burst, which will make it very difficult for central banks to normalize without risking their collapse, he iterated. Madrid based Parrilla said, "the tapering process will be glacial in terms of speed".
In the year 2016, the fund manager said gold could scale to record highs in 5 year time."I think the drivers for gold strength, not only remain but actually have been strengthened." The fund manager further said that he continues to maintain his previous view and said the gold could increase to $3000 to $5000 per ounce in the next 3-5 years.
For some time gold has been trading near the range of $1800 and in August 2020 has hit a record high of $2075.47, when coronavirus led slowdown increased the safe haven appeal of precious yellow metal.
In June this year, gold saw a pullback after Fed's hawkish tone wherein it iterated to scale back its asset buying as early as 2023 as against the earlier 2024. Despite inflation being rising, treasuries are gaining since March end and pushing benchmark bond yields to a historic low. This provides a boost to holding non-interest yielding bullion.
Parrilla with 25 years experience of trading precious metals and also having worked with Goldman Sachs and Bank of America said, "Gold is disconnected from some of the moves in Treasuries and real yields, but could get a boost from a major risk-off event that would make it clear that central banks aren't in control as much as people think".
Divided view on gold
While Parrilla is bullish on gold, other analyst tracking gold are bearish and see it decline going ahead. UBS Group AG strategists including Wayne Gordon and Giovanni Staunovo in a note said the post-pandemic revival, Fed tapering as well as a stronger dollar will all weigh on the precious yellow metal and it will decline to $1700 by 2021 end and further in 2022.