Gold is threatening to become as unpredictable as Bitcoin as a result of the Iran war, according to a leading asset manager.
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Gold is no Longer a Safe Haven
Peter Spiller, founder of CG Asset Management, no longer believes gold still works as a safe haven during times of crisis such as the present U.S. and Iran conflict. So much so that it has sold its holdings in the precious metal.
“The reaction of gold to an actual crisis in the form of the Iran War has been quite disappointing,” he said. “It was negatively correlated on a daily basis with the oil price and positively correlated with the Nasdaq. Some of this may have been a general scramble for liquidity in difficult times. But nevertheless it called into question the motive for holding gold.”
He said that he did not know what the future price of gold will be “any more than we know what the future price of Bitcoin will be.” He added: “But it is clear that it is not a secure haven in times of trouble. Therefore, at a price of $5,150 we took the opportunity to sell all of our holding.”
Price Has Plunged
Indeed, the gold price has slipped around 5% over the last month as the U.S., Israel and Iran exchange blows sending oil prices higher and threatening global economic growth.
This followed a remarkable surge in the gold price over the last 12 months to levels comfortably over $5,000 and heading towards $6,000.
The drivers have been global uncertainty, lower interest rates and central banks moving away from U.S. assets and into gold.
“That was notably true of regimes which felt they might incur the displeasure of Trump, in particular China. Nevertheless, by early 2024, gold was still $2,000 and even by August last year, it was $3,300,” Spiller said. “Over the next six months, the price went on a tear to $5,300 as substantial speculative flows, largely retail, pursued the extraordinary momentum. We fear that this might be a classic bubble where a good fundamental narrative gets taken too far by speculative fever.”
Gold Still Has Support
However, the precious metal does still have some fans out there. Union Bancaire Privée is back buying gold again after cutting its holdings in response to the Iran war.
According to a Bloomberg report, the Swiss private bank is adding bullion, mainly in the form of ETFs, to client portfolios and remains bullish that it could still hit $6,000 by the end of the year.
“We have taken the first steps to rebuild” gold portfolios after the flush-out of “one-sided positions,” Head of Discretionary Portfolio Management in Asia, Paras Gupta told Bloomberg. Gupta said the drivers would be central bank buying, concerns about fiscal deficits and geopolitical tensions.
UBP is looking to further rebuild its gold positions, consisting mostly of bullion-backed exchange-traded funds, after they recovered to around 6% of discretionary portfolios. Gupta said the bank still sees structural demand for gold, including central bank buying, concerns about fiscal deficits and geopolitical tensions.
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