April 16, 2020
Billionaire Paul Singer, one of the best investors in the world over the past 43 years, says this is the perfect environment for gold, and thinks it can trade as high as many multiples of its current price.
As we’ve discussed, with global central banks and governments explicitly devaluing cash, there will be a global reset of cash relative to asset prices (inflation). It’s already starting in gold. Spot gold prices are up close to 20% over the past month.
This is what we’ve been looking for. Here’s an excerpt from my March 18th note, just as that move was starting: “Let’s keep in mind that the Fed has the printing press, and won’t lose the battle in the bond market. In the very near future, the Fed will probably have the 10-year yield where they want it (maybe at 30-40 basis points), and be in complete control of the yield curve. It may take that observation to turn around the price of gold. When it does, we could see gold much, much higher (maybe $2,500ish).”
As we know, the Fed has indeed won the battle in the bond market. And they’ve done it by becoming the last resort buyer in the Treasury market, the municipal bond market and the corporate bond market. The printing press has been working overtime.
A month later, that leaves gold at $1720. But that’s still $200 off of the 2011 Global Financial Crisis induced highs — another 12% higher from here. But again, with global central banks and governments all-in, it’s just the beginning for gold.
Let’s take a look at a gold miners ETF, as a leveraged way to participate in the gold bull market.
As you can see in the chart, a return to the 2011 highs in this ETF (the record highs in gold prices), would mean more than a double (relative to a 12% gain in the underlying).