Mark Mobius, the veteran investor renowned as the "godfather of emerging markets," stated that gold has lost its appeal following a historic rally. He warned that while most market investors remain firmly bullish on the precious metal, a potential rebound in the U.S. dollar could exert downward pressure on its price.
"I would definitely not buy gold at the current price," said Mobius, Managing Director of the Mobius Emerging Opportunities Fund, during a Bloomberg Television interview on Friday. He added that he would only consider allocating to this asset if its price fell by 20% from current levels.
He further pointed out that economic forecasts suggesting a potential reversal for the U.S. economy could drive the dollar stronger from its present level. This shift would likely diminish the attractiveness of precious metals.
Mobius expressed this cautious view just as gold concluded its best-performing year since 1979. Propelled by factors including central bank purchases, falling interest rates, and investment demand from "money debasement trades"—where investors concerned about high debt flee government bonds and fiat currencies—gold prices have climbed steadily. As many of the drivers from last year's rally persist, numerous investors remain optimistic about gold's prospects.
Additionally, Mobius identified China, India, South Korea, and Taiwan as the most favored stock markets in the region for global investors. He stated that the upward momentum in Chinese stocks is sustainable, thanks to significant advancements in the technology sector.
"China's current goal is to catch up with the United States in areas like high-end chips and various AI technologies," said Mobius, who has nearly three decades of experience investing in emerging markets. "Money is flowing into these areas, not the consumer sector."
He remains bullish on Indian equities, citing increased government spending and investment, particularly in the technology industry.
On Friday, international spot gold prices retreated but remained near $4,600 per ounce. Better-than-expected U.S. economic data had tempered market bets on imminent Federal Reserve rate cuts, while an easing of geopolitical tensions weakened safe-haven demand for gold.
"The decline in gold prices is primarily due to reduced market expectations for U.S. intervention regarding Iran's social unrest, coupled with U.S. economic data indicating no urgent need for rapid rate cuts," said Kyle Rodda, an analyst at Capital Economics.
Data from the U.S. Labor Department on Thursday showed that initial jobless claims fell by 9,000 to a seasonally adjusted 198,000, below the 215,000 forecast by economists surveyed by Reuters. Bolstered by this, the U.S. dollar was poised for a third consecutive weekly gain.
A stronger dollar makes dollar-denominated precious metals more expensive for overseas buyers. Conversely, gold, as a non-yielding asset, benefits from low-interest-rate environments where the opportunity cost of holding it is reduced.
Meanwhile, sources within Iran contacted by Reuters on Wednesday and Thursday indicated that local protests had significantly subsided since Monday. Concurrently, U.S. President Trump's rhetoric regarding military intervention against Iran had softened.
The SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported a slight 0.05% increase in its holdings to 1,074.80 tonnes on Thursday, reaching its highest level in over three and a half years.
Simultaneously, gold demand in India remained subdued this week. Prices hitting fresh record highs continued to dampen retail purchasing interest. In China, demand remained stable ahead of the Lunar New Year, with spot gold trading at a premium.
Comments