By the end of the decade, according to Charlie Morris, chief investment officer of Bytetree Asset Management, gold prices would likely reach $7,000 per ounce.
Morris’ prediction for gold comes as Bytetree keeps promoting its brand-new exchange-traded Gold/Bitcoin product. The 21Shares Bytetree BOLD ETP, which follows an index made up of bitcoin and gold, was introduced as an inflation hedge. About 80% of the fund is invested in gold, while 20% is in bitcoin.
“Gold is the stronger asset in the bad times, and Bitcoin is the stronger asset in the good times,” he remarked. The fund essentially has a 60/40 alternative asset allocation and has this inherent countercyclicality.
Both gold and bitcoin have underperformed since the fund’s April inception due to a strengthening US dollar. Looking forward, Morris said that there are indications that the U.S. dollar’s significant surge may be coming to an end. Morris said that despite the U.S. dollar reaching a 20-year high, Jerome Powell’s hawkish remarks on Friday had not given the market any fresh energy.
“No one has benefited from the frightening upswing the dollar has been on for the last two years. You must assume that the whole dollar strength narrative is quite developed and close to reaching its pinnacle, at which point gold will be able to resume its upward trend ” he explained.
Morris said that he anticipates interest rates will peak at the same time that the U.S. currency reaches its top. Morris’ prediction coincides with the markets’ expectation that the Federal Reserve would increase interest rates by 75 basis points the next month. Morris said that there is still a limit to what central banks can accomplish.
Powell made hawkish remarks, but he added that it was simple to speak harsh while the economy was still doing well. “When the data gets really soft, how will he sound? We will have to adjust to living with stagflation since they are unable to raise prices as much as they claim because doing so would ruin the economy.”
Morris predicted that if investors understand that high inflation is a permanent condition, they will see value in gold. Little can be done by central banks to change it. He continued by saying that “the reverse rebound will be spectacular since so many funds were selling off their gold holdings.”
Given current interest rates, gold is somewhat near to fair value, but there will be a significant movement once people understand how incorrect the Fed is on inflation, he said. “It won’t be long until gold is seen as a valuable monetary asset once again.”
Morris sees even more potential for silver than he does for gold. Silver is now 30% undervalued, he said.
“Silver will start to shine when breakevens start to accelerate higher. When real interest rates are low, gold performs well, while silver performs best when inflation is high ” he explained.
Morris noted that when it comes to cryptocurrencies, the present slump is quite beneficial since it distinguishes between strong assets and weak ones. In his view, Bitcoin and Ethereum will be the two biggest winners once everything is said and done.
Morris predicted that Ethereum’s switch from proof of work to proof of stake will revolutionize the cryptocurrency industry.
“That, to me, is the new Nasdaq. Yeah. Even while it may not be very lucrative, the projects themselves will be. The value will be in anything that has the productive ability in the future to host a financial system,” he stated.
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