Saturday, Feb 22, 2014
ARJUNA MAHENDRAN, the chief investment officer, Emirates NBD: “My five- to 10-year view on gold is it will probably settle close to $1,100 to $1,150 an ounce. At that time I will start buying. But I won’t buy for the long term at this point. “At this point I can trade it. I can buy at $1,200 and run up to $1,400 and then sell. I will be buying and selling within that band of $1,200-$1,400, but for the long term I will wait till it falls down to $1,100, which it will once when the Fed really gets into the earnest mode of tapering, which will happen by the middle of the year or so. Then the gold prices will come down to $1,100 to $1,150.
“I have five per cent gold in my global balanced portfolio. That’s a hedge against inflation. Inflation will come but we don’t know when. That’s problem. It will happen in the next five years, that’s what I reckon. As signs of inflation picks up I might raise that weight to eight per cent to 10 per cent.”
“If you think long term, I don’t think it will be lower than $1,100 to $1,150 because that is the marginal cost of production.
“If economic momentum picks up — and at the moment I am long in equities — and equities perform much on what I expect them to do, at some point I might be selling equities and the way to protect me there against inflation is not through cyclical companies but through gold. It will depend on the macro dynamics and how that affects portfolio performance.
“The other scenario that lends to buying gold is when there arises concerns of global slowdown, concerns of the pace of tapering with the economic growth becoming weaker and people in need of some safe assets. Then people will start buying gold. But our view is the underlying health of the United States is still there, and we still believe — that’s our core view — that the tapering, that $10 billion less per month will occur in every single Fed meeting in the coming months.”
By Gaurav Ghose Financial Features Editor
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