According to Neuhauser, chief investment officer at alternative asset management firm Livermore Partners, gold has “a lot [of] further upside” from its current price range.
According to Refinitiv data, the spot gold price was around $1,794 per troy ounce on Tuesday, after falling more than 3% to lows of around $1,729 per ounce earlier this month. Since reaching an all-time high of $2,063 per ounce in August 2020, the metal’s price has fluctuated.
Neuhauser said in a note Friday that the recent drop in gold had “not been helpful for our returns in August,” but added, “I view the situation as short term and one to buy.”
The fund manager stated that he has gold exposure through the ownership of smaller mining stocks.
“Gold weakness is a massive buying opportunity, particularly for select miners that are now generating teens FCF [free cash flow] with upside as the USD falls,” Neuhauser said in an email on Monday.
′′[The miners] are the cheapest part of the market when looking for true value,” he wrote in a Friday note.
Neuhauser gave several reasons for his bullish outlook on gold on Monday’s “Squawk Box Europe.”
For starters, he described gold as a simple “safety trade,” whereas other investors may be more concerned with its relationship with interest rates, given that the Federal Reserve is planning to reduce its quantitative easing program and raise rates in the face of rising inflation.
Investors frequently regard gold as a hedge against rising inflation. The consumer price index for July, released on August 11, showed that while core inflation (excluding energy and food) rose less than expected, prices rose 5.4 percent year on year. Furthermore, the latest producer price index increased 7.8 percent in the year to July, the largest annual increase in over a decade.
Neuhauser also stated that China has resumed its own investment in gold bullion, despite historically being one of the world’s largest consumers of the precious metal. He also claimed that gold would be in short supply in the future due to a lack of new mines opening in the coming years.
In which prices remain high but economic growth slows, would be beneficial to gold prices. He warned that stagflation could be “pretty scary” for markets and consumers if the effects of sluggish growth and higher prices begin to be felt, which lends credence to the idea of investing in gold as a safe-haven asset. Neuhauser suggested that there were already signs of stagflation, citing a drop in consumer activity despite rising prices.
Indeed, data released by the Census Bureau on Tuesday showed that retail sales in the United States fell 1.1 percent in July, worse than the 0.3 percent drop predicted.
“I think even if there is a pullback in economic data and economic activity, you’re going to see those prices remain pretty robust, and… at least in my opinion, we have a real potential for stagflation in future years,” Neuhauser said.
As the S&P 500 doubles from its pandemic low, Moderna leads the top-performing stocks.
Investment banks cut price targets for South Korean chipmakers, warning of an impending downturn.
In addition to gold, Neuhauser said he owns mining stocks to gain exposure to silver, oil, and gas, and he expects these investments to be “very buoyant for some time to come.”
Once again, he argued that these industries would benefit from increased demand but would suffer from a lack of supply due to fewer new mines and oil fields. According to Neuhauser, there are “more and more opportunities within the miners in terms of consolidation and even activism.”
Other investors are interested in commodity stocks as well.
In a Monday note, analysts led by Mislav Matejka stated that they had become “tactically bullish” on commodity equities in Europe in particular.
“We remain bullish on stocks and have recently taken advantage of commodity underperformance in Q2 to upgrade both Miners and Energy,” they wrote in the note.
“European Mining and Energy have both lost 15-20% relative to March, and we believe this is an opportunity to add,” they added.