Heading into one of the most heated elections since the Civil War, one fund believes that gold can help to protect from the tumult that is likely to follow. Here’s their strategy for the coming months.
The Dynamic Precious Metals Fund has been one of the best-performing funds so far this year, having gained 63% since January. The fund’s focus on precious metals in its portfolio allocation allowed it to outperform 82% of its peers, as gold surged to a new all-time high in an unprecedented bid for safety.
While gold’s climb has been powered by numerous red flags that persist, Dynamic’s portfolio manager Robert Cohen sees one factor in particular that should prompt investors to stick to the yellow metal. The 2016 U.S. election was especially hotly-contested, but the tumultuous events of this year have driven Cohen to label the coming November election as the most heated one since the Civil War.
With some expecting the election to stir the markets irrespective of the outcome, Cohen elaborated that investors might want to tighten their portfolio and lessen their exposure to various assets as November approaches. Despite this, Cohen sees gold as the one asset that looks to be a safe bet heading up to the election and onwards. Although the metal has fallen off from its August high of $2,000, it has continued to trade within a range above its previous all-time high, set in 2011.
According to Cohen, the bullish sentiment that currently surrounds gold is much more than a passing trend. General uncertainty might have been the overall theme as gold soared, but it was the historic stimulus issued by the Federal Reserve and the dip by real yields into negative territory that ultimately drove investors towards the asset. Even if the uncertainty dissipates, these factors will remain as powerful drivers, especially when one considers that the global bond market’s downfall has been inching gold up ever since last summer.
Cohen concurs, pointing to both the devaluation of currencies and the issue of sovereign debt as reasons why gold investors shouldn’t swerve too far off course. Prior to this year’s events, the U.S. was already dealing with a massive amount of debt that some economists were claiming to be near a tipping point. Now, the U.S. and countries around the world will need to up their government spending in order to reinvigorate their economies, causing the debt bubble to expand further. As Cohen points out, a sovereign debt default isn’t a likely or a plausible scenario, leaving money printing as the only remaining option. With a guarantee that nations around the world will erode their currencies through money printing, gold’s ability to protect one’s wealth and preserve purchasing power is bound to be displayed in full force, especially over the longer-term.