(Kitco News) Sunday’s flash crash in gold, which pushed prices briefly below $1,700 an ounce has not changed the precious metals long-term fundamentals, according to one fund manager.
In an interview with Kitco News, William Cai, partner at Wilshire Phoenix, said that the precious metal still has an opportunity to rise back to its record highs above $2,000 an ounce by the end of the year.
The company launched an adaptive gold-backed exchange-traded fund in February: the Wilshire wShares Enhanced Gold Trust (NYSE: WGLD). Cai noted that the fund outperformed gold in the first half of the year.
“Because of the fund’s adaptive strategy, we were able to avoid some of the bigger downside moves in gold,” he said.
Although the precious metal has lost some of its speculative luster as investors pay more attention to cryptocurrencies and record-level equity markets, Cai said that gold still plays an important role as a portfolio diversifier and inflation hedge.
“Right now, the spotlight is not on gold, but its supporting factors remain in place,” he said. “We have always said that gold should be a consistent integral piece of investor’s portfolio and Sunday’s volatility doesn’t change that.”
Some economists have said that inflation appears to have peaked with U.S. CPI seeing a 5.4% annual rise in July, missing consensus expectations; however, Cai said that he is not convinced the inflation story is over. The same day the U.S. Labor Department released CPI data, the U.S. Senate passed framework legislation to push forward the government’s $3.5 trillion infrastructure plan.
“The U.S. government continues to pump money into the economy. Inflation is here to stay,” he said. “It’s going to take time for all this money to percolate through the economy, but eventually, it will.”
Not only does the U.S. government continue to spend trillions of dollars, but the U.S. is reaching its debt ceiling limit, and if that is not extended, the U.S. could default on some of its debt obligations.