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Pacific Heights Asset Management CEO Michael Cuggino argues gold is a good long-term investment as long as current monetary policy continues.
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Wall Street Journal.
The golden goal let's talk about it plunging to its lowest level in three months yesterday also about 15%.
Back in the high -- it hit an all guys so.
Is this the end of the gold rush of course it is.
Michael casinos -- -- apple client and to have a permanent portfolio out.
Gold a critical part of the mutual fund he runs he joins us now from San Francisco.
Michael that the issue is yesterday we had a broad sell off in virtually every asset.
So and good many people said -- gold is a haven and not yesterday.
And if you're worried about what the Federal Reserve has been doing in terms of pumping up inflation.
Then we would still want to own it but -- sold off nonetheless is this just an asset that is been pumped up with easy and cheap money there won't collapse was well.
Just like the dot com stocks dead.
Well -- in yesterday's trade was based on negative news coming out of Europe but I mean as we all know gold is a very volatile asset and it's subject to wild price swings but.
I think you have to separate that from the long term.
Prognosis -- long term trend and the reality is that as long as we have easy money around the world very loose Federal Reserve and European Central Bank.
Monetary policies and the white.
You know.
Gold -- An anchor against the devaluation.
Unit value of Paper currencies whether it's the dollar the Euro the yen or any other established currency subpar but I think you're gonna see that trend continue in the longer term but it's always have all -- But the growing thinking is that that that easy Monday.
Is going to start going away.
And that the central banks could act.
May be quicker and more rapidly certainly we know that probably no additional stimulus no additional juices on the table certainly with -- Federer is our.
So what does that mean then.
For gold because again if that that easy money goes the way the bottom could fall out of -- particularly with so much hot money -- it from retail investors -- that gold spider.
Well sure I bid if if by by your premise you're probably right at some point although.
I don't think it's a given yet.
I mean that the basic conventional wisdom right now is that fed easing is over nothing else is gonna happen from a monetary stimulus side and and it's gonna be you know tighter money and rising interest rates from here no question those would be negatives for gold.
Going forward but I'm not convinced that mean -- that other comments from the Fed saying that they might keep low federal funds rates going to -- 2014.
You're heading into a very significant election year that's going to be a lot of pressure put to bear.
On the Federal Reserve if the economy does in fact you don't slow down like it did last year.
I don't think everybody seems to believe we've got aggressive growth going on economic statistics are positive.
But we could have another slowdown I'm not convinced that -- out of the woods yet either I think we have anemic economic growth that we're under performing our economic potential here in the states and therefore a slowdown economic activity and further stimulus is not out of the woods in my view my regardless of what they call it.
My I was raised the issue of the gold -- -- the second largest exchange traded fund after the S&P 500 -- on the spdr ETF.
I want to know does it concern you that with so many individuals probably owning -- to having exposure to it.
That you could see an unwinding.
Of that.
Particularly through that ATF if gold continues its move down that you might not know how.
Fast gold can fall because -- as so many retail investors haven't owned -- before.
Well a lot of retail investors on equity of bonds through and -- there's normal trade that goes on data day there are sometimes good trades go up and down.
I think the reality is that we've had a lot of liquidity.
Increased.
Unit values of currency around the world have decreased and therefore.
Gold has increased in value whether it goes down to 200 dollars an -- again like it was twelve years ago I mean I dealt that that's going to happen.
Could you see it ebb and flow depending on people's perceptions of monetary policy and inflation and and and the like sure absolutely and so that that speaks to its volatility but I think for the reasons that I've given.
-- over time you're gonna see it continue to trend up because.
The the Paper the value of Paper money and the unit declines continue -- until we have a sea change of thinking.
With respect to that spending that creation of Paper money.
That devaluation I think you're gonna continue to see -- trend up in the long term.
Guy until I'm not judge the man is the gold bars then I'm not convinced that Michael thank -- pages they have Michael Pearson you know able -- something that you -- in 2000.
I know that does not happen in my -- I'm Michael -- -- thank you know will be another great milestone -- the -- without.
