The hedge fund manager, who predicted the metal’s rise to an all-time high of $2,000 per ounce last summer, is confident the price could climb to $3,000 to $5,000 an ounce in the next three to five years.
Here’s his rationale for gambling on gold and the best ways for ordinary investors to follow his lead.
Gold is primed to surge to fresh highs as the risks around the central banks unwinding massive stimulus are under-appreciated by investors, said a fund manager who forecasts the metal’s ascent to a record last year.
Diego Parrilla, who manages the $250 million Quadriga Igneo fund, said there isn’t a widespread awareness of the long-term damage that’s been caused by ultra-loose monetary and fiscal policies. Artificially low-interest rates have created asset bubbles that are too big to burst, which will make it very difficult for central banks to normalize without risking their collapse, he said.
“The tapering process will be glacial in terms of speed,” said the Madrid-based Parrilla, who correctly predicted in 2016 that gold would climb to a record within five years. “I think the drivers for gold strength, not only remain but actually have been strengthened.”
Gold took a tumble after the Fed’s hawkish shift in June when officials sped up their timetable for policy tightening and said they would start discussing scaling back bond-buying. Treasuries have rallied since the end of March even as inflation accelerates, pushing 10-year real yields to a record low. That would typically raise the appeal of holding non-interest-bearing bullion, but prices are still well below last year’s high.
Gold is disconnected from some of the moves in Treasuries and real yields, but could get a boost from a major risk-off event that would make it clear that central banks aren’t in control as much as people think, said Parrilla, who has worked at Goldman Sachs Group Inc. And Bank of America Merrill Lynch and has 25 years experience trading precious metals.
Parrilla believes both could happen soon, as people are not appreciating the risks of the massive pandemic stimulus efforts underway, like today’s incredibly low-interest rates. He expects the next decade will see runaway inflation that central banks cannot control.
“Central bank money printing isn’t really solving problems, it’s delaying the problem,” Parrilla said. “Gold will benefit purely from being a physical asset that you cannot print.”
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