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• Gold price could reach $ 5,000
• Demand for raw materials and real estate could increase
• Fiat currencies are the main bubble, gold is the anti-bubble
Higher gold price as a result of inflation
Hedge fund manager Diego Parrilla anticipates inflation within the next ten years, Bloomberg reports. However, he does not believe that the central banks can control them. This can fuel asset bubbles and corporate debt addiction and make interest rate increases impossible without an economic crash. Over the next ten years, banks and governments would continue to print and lend money to help businesses and individuals in financial need and prevent the entire economic system from collapsing, Parrilla said. As a result of inflation, gold prices could rise to $ 3,000 to $ 5,000 an ounce in the next three to five years. The gold price is currently around $ 1,800.
Central banks do not expect inflation
For the most part, Wall Street was confident about the price pressure triggered by record-breaking economic spending. The fear of faster inflation has not come true for years. Both the President of the US Central Bank of San Francisco, Mary Daly, and the President of the Central Bank of Richmond, Thomas Barkin, announced at the beginning of July that high inflation was not expected in the current crisis situation. However, should this happen, the central banks would have enough instruments to get the situation under control.
From Parrilla’s point of view, stimulus measures have deeper problems that run through the entire financial system. For example, he is critical of the fact that central banks have sometimes kept their interest rates close to zero for more than a decade.
Gold price is “anti-bubble”
According to Parrilla, there has been a shift from risk-free to interest-free risk in the past decade, which has enabled a global series of parallel synchronous bubbles For his investments, he is looking for anti-bubbles, cheap investments that increase in value when bubbles finally burst. He describes fiat currencies as one of the current main bubbles, and gold as a clear anti-bubble. So the question is not whether prices will rise, but when. The gold price has already risen by about 19 percent this year. Investors argue that the rapid expansion of central bank balance sheets lowers currency values, increasing demand for raw materials and real estate.
Parrilla manages the $ 450 million Quadriga Igneo hedge fund. While traditional funds are expected to generate positive returns, Parrilla’s funds want to react accordingly to the next major crash and generate capital in the long term.
The value of his defensive portfolio had skyrocketed as fears of the corona virus shook the markets in February and March. He invests around 50 percent in gold and precious metals, 25 percent in bonds and otherwise in option strategies that benefit from uncertain market situations, such as options to buy gold and the US dollar. Parrilla, who originally comes from mining engineering, published a book in 2017 on the relationship between bubbles and anti-bubbles. His fund has been in existence since 2018, and he already had a 10 percent return at the end of the first year. In 2019, it was mostly weaker.
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