Ray Dalio, founder of the world’s biggest hedge fund manager Bridgewater Associates, sees a number of factors continuing to support gold.
The precious metal has gained 9 percent over the past seven weeks to a six-month high, with the December gold futures contract closing at $1,731.80 an ounce Monday.
“Gold is primarily an alternative to fiat currency and a storehold [sic] of wealth,” Dalio writes in a letter to investors obtained by Business Insider. “The main advantage that gold has over other currencies is that it can’t be printed.”
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Developed economies will continue to rely on monetary stimulus for years, he says. And central bank easing, of course, raises the threat of soaring inflation.
Near record-low interest rates also argue for higher gold prices, Dalio says. The fact that gold doesn’t pay any interest is generally seen as one of the metal’s main drawbacks as an investment, he points out.
But, “real interest rates are likely to remain very low and below real growth rates, as a means of combating deleveraging and improving debt sustainability,” Dalio writes.
“As such, deleveragings strongly favor shifts from financial assets into gold and other tangible assets.”
To be sure, many experts anticipate a correction for the metal soon.
"We could see a pullback anytime, as prices are fairly overbought on a daily basis,” Mark Arbeter, chief technical strategist of S&P Capital IQ, tells Reuters. “Once we hit the $1,800 level, we think there could be a multi-week congestion."
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