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Charles Benavidez

Charles Benavidez

Staff Writer, Safehaven.com

Charles Benavidez is a writer and editor for Safehaven.com. Charles is located in New York City and has over 5 years of experiencing covering financial…

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This Billionaire Is Betting His Fortune On Gold

Gold

Egyptian billionaire Naguib Sawiris thinks the massively overvalued stock market could push gold prices to $1,800, and that’s why he’s invested half of his $5.7-billion net worth in the precious metal.

It’s a lot to bet on gold, even in the best of times for precious metals, but Sawiris is fearful of the stock market, and rising geopolitical risk and steady demand are his justifications.

“The stock market is overvalued and I feel that another crash will happen. That is why 50 percent of my net worth is in gold,” Sawiris told Bloomberg in an interview this week. “[Gold prices] should go back to five years ago, [when they were] at $1,700-$1,800.”

When it comes to demand, Sawiris is looking at gold appetites in both India and China, even if demand out of India has been on the decline in recent years:

(Click to enlarge)

At the same time, some key production indicators suggest that on the supply side, the dip in production has been less than any dip in demand. Look at Barrick Gold’s production movement:

(Click to enlarge)

Goldman Sachs is also bullish on gold, but its price target is $1,450 an ounce by the end of this year, even with a real interest rate climb. The bank noted that gold will draw support from emerging-market demand.

And on the geopolitical front, Sawiris notes that “we are full of crises”, particularly in the Middle East, and “Mr. Trump isn’t helping”.

Topping the geopolitical risk list is Iran’s nuclear deal, Trump’s much-anticipated decision on renewing sanctions on Iran, and—most recently—efforts by Israeli Prime Minister Benjamin Netanyahu to influence Trump. Trump will make this decision on 12 May, and in the meantime, Netanyahu’s war-mongering is not the new smoking gun it professes to be, rather merely a trick of recirculating old documents. But the markets don’t care, operating on sexy headlines as it does.

Of course, there are just as many gold bears out there as there are bulls. The price of gold right now isn’t very exciting, and it’s been struggling to stay above $1,300—even more so given the recent rally in the U.S. dollar index.

(Click to enlarge)

Source: InfoMine

In the bear camp, Capital Economics on Monday said we’d be lucky to see $1,400 gold before 2020, after the Federal Reserve finished its monetary policy tightening. That same sentiment was echoed by Coutts Investments, saying that “interest rates are likely to remain at levels where holding gold is uneconomic for now.”

Related: What Really Drives The Price Of Gold?

There are few things to look out for this week in terms of where gold might be going in the immediate term—on its way to Sawiris’ targeted $1,800.

On Tuesday, the Federal Reserve’s Open Market Committee (FOMC) meeting got underway, and will close today with a statement in the afternoon. Gold will be watching, of course.

Then, later this week, the U.S. is sending a high-level trade delegation to China to figure out how they might avoid an all-out trade war.

Closing out the week on Friday, the Labor Department will come out with its employment report, which is one of the most important data sets for the month.

By Charles Benavidez for Safehaven.com

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