Raoul Pal, who now runs the Global Macro Investor advisory service, believes that the U.S., like many of its counterparts in Europe and Japan, is headed for negative interest rates. From MarketWatch:
“As we get to negative interest rates, gold is a good place to park your cash,” said Pal, who discussed his outlook with MarketWatch in a September interview and a follow-up conversation over email.
“I’m not a gold bug,” the former GLG Global Macro Fund co-manager — who is also watching the dollar closely — “but this is the currency I would choose now.”
“All the really serious thinkers are interested in gold,” said Pal, noting that we’re almost certainly heading for a recession within the next year. The current business cycle is lining up to produce a big downturn, “and 100% of all two-term elections have had a recession within 12 months since 1910.”
Pal noted the price of gold could double if his predictions about the economy and interest rates come to fruition. That would mean prices around $2,500 per ounce. He’s also bullish on the dollar:
“The world has shifted because of negative interest rates,” Pal said. “We know the dollar will go higher, [and] gold may outperform over time, the reason being because of negative interest rates. If I get it right, I have dollars and gold…I don’t make much of a loss if that correlation breaks.”
The SPDR Gold Trust ETF (NYSE:GLD) was mostly flat in premarket trading Friday at $120.69 per share. Year-to-date, the largest exchange traded fund tied to the spot price of gold bullion has gained 19%.