Interest in gold and its utility will only grow – Sprott's Grosskopf
NEW YORK (Mar 4) Gold prices have pushed solidly higher in the last few weeks as investors look for safe-haven assets to protect against geopolitical risks due to Russia's invasion of Ukraine, however, more volatility has also be introduced into the marketplace, according to one fund manager.
In a recent interview with Kitco News, Peter Grosskopf, CEO of Sprott Inc, said that investors need to ignore the daily price swings and focus on the market's broader long-term uptrend. While gold prices have pushed above $1,900 an ounce, the market is well off last week's highs as a rush of safe-haven demand flooded the market.
April gold futures last traded at $1,935.80 an ounce, up 0.70% on the day.
Looking at gold's broader prospects, Grosskopf added that more and more investors are turning to gold for various reasons.
"We're on the front lines of gold business, and what we are seeing is more investors moving into gold and adding it to their portfolios at higher percentages. That's the underlying bid for gold," he said.
Grosskopf added that the market is no longer reserved for just "gold bugs." He noted that endowments, family offices, and pension funds are looking at gold.
"Almost every big state pension fund in the U.S. is looking at gold," he said. "Only a few years ago, it was maybe two out of 50 funds that were interested in gold."
As to what has changed in the last few years, Grosskopf said that investors finally realize the threat of rising inflation on the global economy. As consumer prices rise, consumption falls, which in turn will lead to lower economic activity and lower profits for public companies, he said.
"People are starting to realize that if they don't do something, they're not going to be protected. The pressures have built up, so being in bonds will hurt you. Being in stocks will hurt you. Holding cash is punishing you, but right now, it is prudent to hold cash," he said. "Gold has become a long-term asset. Its utility in a portfolio is going up."
Grosskopf said that he expects interest in gold will continue to grow as equity markets see more volatility. He added that he doesn't expect to see a major rout in equities, but a normal correction in the current environment will be enough to spook investors into safe-haven assets.
As to how investors should play gold as a long-term asset, Grosskopf said that they need to be a little more strategic. Instead of chasing the market higher because of geopolitical event risks, look for buying when prices and interest are low.
KITCO
