(Kitco News) – Gold has been an overwhelming force in currency markets and while the market could be taking a break in the near-term, there appears to be room for more upside, according to one fund manager.
In a recent interview with Kitco News, Christopher Cruden, director at Insch Kintore Ltd, noted that in February his firm held a maximum amount of long gold positions against all Group of Seven currencies: U.S. dollar, Canadian dollar, Australian dollar, British pound, euro, Swiss franc, and Japanese yen.
However, in an update Tuesday, Cruden said that the Insch Kintore fund has now turned neutral on gold; it only holds full long position against the British pound, he said. The shift comes as gold prices hold relatively steady near all-time highs in a number of global currencies.
Cruden said that he was expecting to see the current pause in the gold market as the yellow metal has made most of its gains in the currency market in a low volatile market.
“The one thing we know about trends is that low volatility initiates a trend and high volatility signals an end to the trend,” he said. “Because volatility has been so low for so long we are expecting the next trend break-out to be a major event.”
Cruden noted that the Kintore fund is fairly agnostic on gold prices as it can hold both long and short positions in currency markets. However, he added that listening to some of the experts in the marketplace, it sounds like the precious metal still has a lot of bullish momentum.
“I would be delighted if they were right,” he said.
Personally, Cruden said that he expects gold prices to go higher as central banks continue to maintain ultra-loose monetary policy. Cruden’s comments came before the Federal Reserve announced an emergency inter-meeting 50-basis-point rate cut.
“I don’t have a lot of faith in central banks,” he said. “I think investors should have some gold to hedge against rampant stupidity in monetary policy.”
Even after the Federal Reserve’s emergency cut, markets are pricing in another 50 basis point move at the next monetary policy meeting. Later this week, economists are expecting the European Central Bank to also loosen its monetary policy through “targeted initiatives.”
While investors have piled into gold at unprecedented levels as panic has gripped financial markets, Cruden said that he is happy to continue to see gold as a global currency. He added that the fundamental flaw in all gold products is that it is a bet that prices will continue to go up.
“Being in gold is fine when prices are going up but what happens when the trend shifts,” he said. “Gold’s fundamental strength is that it is not correlated to anything so you should have the flexibility up and down to follow the prevailing trend.”
The Cruden comments come after Insch Kintore opened up its gold currency strategy to regular investors. In early February, the company partnered with British investment Rudolf Wolff ltd to create a fund for European, British and U.S. investors.
Year-to-date, the strategy is up 18%. Meanwhile, April gold futures last traded at $1,659 an ounce, up roughly 9% since the start of the year.
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