By John McDonald
Paul Tudor Jones, billionaire founder and manager of hedge fund Tudor Investment Corp., said in mid-June that gold is his “favorite trade” right now and will likely remain so for the next 1-2 years.
“[Gold] has everything going for it,” he told Bloomberg, adding that if the precious metal reached $1,400, it would “push to $1,700 rather quickly.”
That particular insight is likely extremely exciting to gold investors looking to buy the metal in July, given gold prices have been hovering right around $1,400 since the beginning of July.
Thanks to easing tensions on the world geopolitical stage, gold prices recently fell slightly.
However, they have been steadily trending upward and appear very unlikely to take any sort of long-term downward swing.
Even in light of potential easing of tensions between the United States and other countries like China, Jones believes gold has a long-term, positive growth period ahead of it because the current tensions are setting a tenor for future trends.
He cited a return to “tariffs and other protectionist policies” not only in the United States but in many other countries as the source of a trend toward “shrinking global trade.” After 75 years of globalization and free trade, Jones believes there is a long way up before gold hits the top if this type of trade condensation continues.
During the G-20 summit at the end of June, President Trump and Chinese president Xi Jinping agreed they would continue to discuss trade policies between the two countries moving forward.
In the interim, the president said he would continue to allow U.S. companies to sell to Chinese tech giant Huawei, generally considered a significant concession.
However, this is a truce, not a resolution. As a result, it is likely investors will continue to remain anxious and, as a result, gold should rise in the short term.
As Jones pointed out, even if the trade standoff were resolved today, it seems to signify a growing trend in foreign policy wherein protectionist practices are favored over recent history’s “global” and free-trade preferences.
Added to this international perspective, from inside the United States things are looking good for gold as well. Many analysts are beginning to agree a recession could happen in the next 6 to 18 months, and any time general consensus starts to lean in this direction, gold values benefit as investors begin to look for hedges against inflation and alternative investments to the conventional stock market.
What does Jones have to say on the matter? “[Reversal globalization] would make one think that it’s possible we go into a recession,” he said. “It would make one think that rates in the United States go back down to the zero-bound level. Gold in that situation is going to scream. It will be the antidote for people with equity portfolios.”