Gold received a vote of confidence from hedge fund manager and philanthropist Paul Tudor Jones who says that if the commodity can break the $1,400 price barrier, it could reach $1,700 quickly. With trade wars looming coupled with a more dovish central bank, gold is what Jones is eyeing within the next two years.
“[Gold] has everything going for it,” said Jones.
“We’ve had 75 years of expanding globalization and trade… and now all of a sudden it’s stopped,” he added further. “That would make one think that it’s possible we go into a recession; it would make one think that rates in the United States go back down to the zero bound level; gold in that situation is going to scream. [Gold] will be the antidote for people with equity portfolios.”
For the latter, investors can look at exchange-traded funds (ETFs) like the SPDR Gold MiniShares (NYSEArca: GLDM) and SPDR Gold Shares (NYSEArca: GLD). Adding precious metals to a portfolio certainly speaks to the diversification benefits of gold, among other things.
Additionally, short-term traders can also play the gold market through miners via the VanEck Vectors Gold Miners (NYSEArca: GDX), Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG) and the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT).
May’s market oscillations certainly gave investors a thrilling ride on the volatility roller coaster and this is exactly what Jones saw coming as early as last year. Now, Jones has the prescience to forecast rate cuts instituted by the Federal Reserve.
Now that a U.S.-China trade deal is left in limbo, it leaves investors looking for the next trigger event to save the markets. With the central bank keeping rates steady thus far in 2019, the next move investors are hoping for is a rate cut, especially if the Fed is sensing a slowdown given the latest economic data.
The Labor Department revealed that only 75,000 jobs were created in May, which fell below expectations and could be a sign that the U.S. economy could be on the verge of a slowdown. Nonetheless, the unemployment rate remained at a generational low of 3.6 percent.
With a central bank dependent on economic data, such as employment figures, it will be interesting to see just how much it will influence their next interest rate policy move. The capital markets are already pricing in a rate cut given the rise in U.S. equities the past week.
“I didn’t think we’d have a first cut in 2019,” Jones said. “I don’t think we would have had that had we not gotten into this tariff battle, and so it has accelerated everything.”
“The tariffs are a very material event,” Jones added. “We haven’t had any experience in modern times with them. So you have to readjust the entire outlook.”
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