Spartan Capital Securities’ Peter Cardillo tells Reuters’ Fred Katayama why he sees gold rising to around $2500 by year end.
FRED KATAYAMA: Stock market indexes slipping Friday, with the declines led by energy and financials. For more on the markets and some of the economic data that had come out today we’re joined by Peter Cardillo. He’s chief market economist at Spartan Capital Securities. Happy Friday to you, Peter.
PETER CARDILLO: Thank you.
FRED KATAYAMA: So Peter, any clear catalyst for the market decline today?
PETER CARDILLO: No, I don’t think so. I think, you know, traders woke up this morning and said, hey, this market is overbought. And they began taking profits. And you know, it’s just a matter of time before we see a pullback of maybe 8%.
This market is really stretched out. And you know, so far, the news has been good. In fact, the macro news has been improving. The earnings got off to a good season. And of course, we’ll be hearing more about earnings next week. There are over 700 companies reporting and some major S&P companies. So we’ll have a better picture.
FRED KATAYAMA: Well, you talk about stocks being stretched. Bitcoin, that really went to the stratosphere. But it has had a hard January. It’s down. It’s steadying today, but it’s lost about roughly 11% this week, it’s probably biggest weekly drop since September. It’s certainly down in double digits from January 8. Is this just a blip, or is this heading further south?
PETER CARDILLO: Well, look, let me just start off by saying, you know, I’m not a believer of the Bitcoin. I think it’s just pure speculation at this point. That’s not to say that there may not be a place for it somewhere down the road. But I don’t think it replaces gold as a traditional hedge. And I certainly don’t think it replaces gold as far as a hedge against inflation.
And by the way, I don’t know if you noticed some of the macro news that we got out today. We saw the PMI manufacturing, which came in better than expected. But if you looked at the rise in inflation there, the inflation component, that’s telling us that inflation might not appear in the official data. But there’s certainly inflation out there. And someday it will appear in the inflation data.
FRED KATAYAMA: And Peter, those factory prices, factory activity that you were talking about earlier, the factory prices in that report, they rose to its highest level since July of 2008. We also had a report on home sales. It unexpectedly rose. And again, prices there are an issue. Do you foresee inflation itself becoming an issue for investors that would make them flock to gold again?
PETER CARDILLO: I think so. You know, it’s not in the immediate future. But let’s say maybe a year, year and a half down the road, I think the Fed is going to have to be very combative because we’re going to see inflation, and inflation that’s going to surpass the inflation target set by the Fed.
FRED KATAYAMA: Well, Peter, gold prices are down about 10% from its August peak. Given the outlook for inflation that you mentioned, do you think investors should be picking up gold at current levels?
PETER CARDILLO: You know, I’ve always been a great believer in gold. And I always believe that, in every portfolio, you should be hedged with a certain amount of gold in any form that you might want to buy it in. And so you know, I think gold is headed much higher because I do believe that inflation is headed higher.
And if you looked at some of the macro news today, you’ll see that the manufacturing PMI, we saw prices rise. And we saw home sale prices rise again. And this has been going on in the home sector for a long time. And now we’re beginning to see inflation stick its head out in other sectors of the economy.
So I think, not in the immediate future, but maybe a year, year and a half down the road, we’re going to be seeing a very combative Fed because inflation is probably going to go above their target.
FRED KATAYAMA: Which would send gold prices to around how high this year in 2021?
PETER CARDILLO: Well, you know, if you look what happened this week, we were actually up, even though today the market closed down by about $10, but if you look at the gains, I think we added on like a little over 1% for this week. And we’re right now in that area where we could have a technical breakout that would take us to close to 2,000. And I believe that by year end, we could be as high as 2,500.
FRED KATAYAMA: All right, thank you, Peter, appreciate it. Our Thanks to Peter Cardillo of Spartan Capital Securities. I’m Fred Katayama in New York. This is Reuters. Have a wonderful weekend.