Conflicts in Iran along with increased defense spending in Europe and the US are creating a positive foundation for gold prices in the medium term, with the $6,000 per ounce mark still within sight, according to Chris Mancini - Portfolio Co-manager at Gabelli gold investment fund.
Talking to Kitco News, Mr. Mancini said that although gold prices have decreased since the Iran conflict broke out, this shows that the precious metal is playing its right role in times of crisis, not only for investors but also for countries.
He believes that Turkey and the Gulf countries may be selling gold, especially in the context of difficult oil exports and needing financial resources to cover costs. With available gold reserves, gold is playing a role as a liquid asset in the current period.
Mr. Mancini also emphasized the difference between gold and government debt instruments. According to him, gold is an asset not attached to the obligations of any party. Unlike US, German or French government bonds, buying gold is not lending, but direct ownership of assets.
He believes that as public debt and budget deficits increase, gold often becomes more attractive, and sharp increases in defense spending also contribute to strengthening this trend.
In addition, the conflict in Iran and the trend of increased defense spending are taking place in the context of the world gradually reducing dependence on the USD in foreign exchange reserves.
He cited the event when Russia launched an operation in Ukraine, the US restricted access to Russian financial assets, including US government bonds. This made many countries realize the risk of holding assets in USD and contributed to boosting gold prices sharply in recent years.
According to Mr. Mancini, discussions about a new economic order in the world are increasing, in which the USD may no longer play the role of a global reserve currency. In that context, countries with trade surpluses may no longer want to continue accumulating USD and lending to the US through bond purchases. If this scenario occurs, gold will become the main alternative.
In the medium term, Mr. Mancini still expects gold prices to exceed the 6,000 USD per ounce mark. He said gold prices were once around 5,300 USD before adjusting due to selling activity and related factors, but when the market stabilizes and a new trend is clearly formed, prices may rise again and exceed the upper threshold.
In Tuesday's trading session, gold prices continued to fluctuate strongly, at one point falling to 4,607.72 USD per ounce around after 10 am US Eastern time, before recovering again.
