Rockefeller Foundation head: "gold prices are random"
Ruchir Sharma, a renowned economist and head of the board of directors of Rockefeller International, expressed concern about the sharp increase in the value of gold. At the end of January there was a significant sell-off of the precious metal, but over the past year its price has increased by 74%, making it one of the most profitable assets on the market, writes businessinsider.com.
Anxiety instead of optimism
The rapid growth of gold prices, which began last year, is alarming and makes investors look for various explanations for this phenomenon, said an experienced expert.
In an interview with CNBC, he emphasized that the current rise in gold prices is different “from the rally of the 1970s.” The record rise in gold prices in the 1970s came to an end when the Federal Reserve began raising interest rates in 1980 to fight inflation. This made the U.S. dollar a more attractive means of preserving wealth than other assets, leading to a sharp drop in gold prices by more than 50 percent from a peak in 1980 to mid-1982.
“I have always been optimistic about gold, but now, given the rapid rise in its value in recent months, I have to admit that this phenomenon has no real cause,” Sharma said, implying that earlier increases in gold prices were based on more specific factors such as changes in interest rates or inflation.
Diversify portfolios
According to Sharma, over the past year, investors have put forward many theories to explain the rise in gold prices. These included talk of the impact of uncertainty around tariffs, budget deficits and potential inflation in the US. However, he said these risks were not reflected in other safe haven assets, emphasizing the stability of bonds and the U.S. dollar in recent months.
While Sharma believes it is unlikely that the Federal Reserve will raise interest rates anytime soon, he recommends that investors diversify their investments by including other commodities. In a column for the Financial Times this week, Sharma said his attitude toward gold has changed from bullish to more neutral.
“In a market that is disconnected from fundamentals and driven by a plethora of random theories, it is difficult to know which one will prove correct and stand the test of time,” the Rockefeller Foundation head wrote.
