VIDEO — Gwen Preston: Negative Real Rates Still Gold’s Main Driver
Gwen Preston of Resource Maven encouraged investors to understand their goals and time horizons when they enter the gold market.
In a year that’s been full of turmoil, plenty of factors have emerged to drive the gold price.
Speaking to the Investing News Network, Gwen Preston of Resource Maven explained that negative real interest rates are still the most important factor to watch when it comes to the yellow metal.
Why? She explained that interest rates determine where low-risk capital goes if it wants to make money. For decades the answer was bonds because they offered good returns.
That’s changed since the 2008 financial crisis — investing in bonds no longer pays, and now low-risk capital has to go elsewhere in order to generate a return.
It’s largely gone to the stock market, said Preston, but there are problems there too, and as a result low-risk capital has begun hedging stock market risks with assets like gold.
“Interest rates don’t actually impact gold, but the financial situations that create a negative real interest rate environment usually do support gold,” she commented. “We’re certainly in that situation right now.”
That’s not to discount factors like the coronavirus and the upcoming US election. But, said Preston, how closely investors watch these other drivers depends on whether they want to pay attention to the long-term outlook or the shorter-term picture for gold.
“I think that if you are interested in gold and silver, you need to take a look at the overall setup … and decide that the environment is bullish for gold. That’s your overall premise. Then you want to decide how you’re going to take advantage of that,” she said.
“If you want to be actively trading on a daily, weekly basis, then you really need to pay attention to a lot of the news flow and the impacts that it’s having,” Preston continued. “If you don’t want to trade on a daily basis, then you don’t need to pay attention to all of that, you just need to build a low-risk, buy-and-hold portfolio … and then the noise doesn’t actually matter.”
Watch the interview above for more from Preston on gold, junior miners and how she’s investing.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.