We Can’t Talk About a Bottom in Gold Until This Happens

Will Rhind: We Can’t Talk About a Bottom in Gold Until This Happensyoutu.be

With the gold price still lower than most investors would like, is it time to call a bottom?

According to Will Rhind, CEO of GraniteShares, it’s not yet possible to do that.

“We can only really start to talk about gold bottoming at the same time as we’re talking about the (US) dollar peaking, and I’m not quite sure we’re ready to say that yet until … we have a bit more clarity around what happens with interest rates,” he said.

Rhind was speaking ahead of this week’s US Federal Reserve meeting, where the central bank hiked interest rates by 75 basis points for the fourth time in a row. The central bank’s short-term borrowing rate is now set at 3.75 to 4 percent.

The boost was anticipated by many market watchers, including Rhind, who noted that the Fed’s interest rate increases have been well telegraphed. “I think the real key question is really at what point do these rate hikes lead to something breaking in the economy? Or do they at all?” he said. “That’s kind of been the key question for me.”

He hopes to see the central bank pivot before anything gets broken, and said that a singleminded approach to quashing inflation could have negative consequences. “(The Fed) might be successful in bringing down inflation, but at what cost? I think people have to start thinking about — would you rather have an environment where, yes, there’s higher inflation in the economy, but you have a job, or there’s maybe lower inflation in the economy and you have no job,” Rhind commented.

While it’s not desirable, a scenario where the Fed continues to come on strong could benefit gold.

“If we get a situation where there’s another market dislocation because of a policy mistake, (if) the Fed pushes things too far and ends up causing a recession, particularly a hard landing … (and) that bleeds through into the broader economy, we could see a situation more like 2008, where gold actually did very well, not necessarily because of anything other than people taking flight to high-quality assets — gold was one of the premium places that people went,” he said.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

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