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Gold: the “Trade of the Century”

Author: Ian Davis - Bullion Manager

Published: 26 Mar 2019

Last Updated: 3 Apr 2019

According to Bloomberg:

“One of last year’s best-performing hedge funds says the “trade of the century” is to buy gold and sell stocks as risk assets are due for another meltdown. “

Crescat Capitol LLC, a Denver based fund, is going long on gold whilst shorting global equities. With this plan making up some 75% of their overall strategy they are firmly of the belief that a global slowdown is on the cards – why else adopt this concept?

A slowdown could well be true...... There are plenty of reports of slowing economies particularly China, the US and the EU, all are cause for concern. The FED and BoE have interest rates on hold and the ECB has just starting a fresh round of fiscal stimulus. All of this points to a risk of recession and policy makers look like they are already planning for a downturn.

US corporate debt remains high on the risk radar for investors as bonds issued following the financial crisis of 2008 begin to reach maturity. Refinancing debts may see profits and cashflow being wiped out with some major public companies’ unable to service debt acting as the recession trigger. 

Furthermore, Steve Eisman, who was made famous in the book “The Big Short”, is currently joined by several funds and investors shorting Canadian banks, citing another mortgage bubble. He has said he does not expect another collapse like in 2008 but when you start to add up global risks and unknown complexities it could be the perfect storm for a recession.

There are plenty of signs here in Blackpol to suggest Crescat Capitol may have their strategy right! We can confirm gold bullion trading is up this year, likely buoyed by Brexit but with all the gloomy forecasts we can’t see our gold business slowing anytime soon!

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