The influential Motley Fool has issued a rare “buy” signal that investors follow George Soros into gold.
The Alexandria, Virginia-based financial services company warned of a stock market bubble and a potential global economic crisis that would make gold a safe bet for investors.
“One of the best hedges against the risk of a market correction is gold. Not only is it recognized as one of the best safe-haven assets to hold during times of crisis, but its value is negatively correlated to stocks.”
On the downside, it said the outlook for the “controversial asset” remains murky, while gold has fallen sharply ahead a stronger dollar, a soaring U.S. stock market and a Federal Reserve’s recent hawkishness over interest rates.
Then there was George Soros’ decision last spring to unload his 58 million shares of gold miner Barrick Gold Corp, which triggered worry among investors.
“Nonetheless,” the Fool said, “there are signs that every investor should have exposure to gold at this time.”
The reasons, it said:
— The global economy remains riven with economic and political cleavages that have the potential to trigger another economic crisis.
— The Eurozone is caught in a deep economic slump that shows no signs of improving. Its banks are being hit hard by the ECB’s negative interest rate policy, while mounting bad debts across the banking sector are raising the spectre of yet another banking bailout.
— There is a real risk that the world’s largest transnational economy will collapse with the Brexit emphasizing the political discord that exists in many member states.
— China, the world’s third-largest economy and largest consumer of basic materials, is experiencing an economic slowdown; some investors, such as Soros, are predicting that a hard landing is imminent. For July 2016 both industrial activity and real estate development slumped for the third straight month, indicating that Beijing’s investment-led stimulus is failing to gain traction.
— There are growing concerns over a trillion dollar asset bubble that, according to Soros, means conditions in China are reminiscent of those that existed in the U.S. in the run up to the global financial crisis of 2008.
“Finally,” it said, “there are signs that quantitative easing has spawned a massive asset bubble that has caused U.S. equity valuations to disconnect from economic reality, leaving them massively overvalued.”
Even Soros has sunk his money into gold, despite unloading his investment in Barrick. During the second quarter, Soros loaded up on gold, making a $29 million bet on the SPDR Gold Trust ETF.
“This can only reflect one thing,” the Motley Fool Reported. “Soros is expecting another economic calamity and market correction that will cause the price of gold to soar.”