Add Chris Goolgasian to the list of investors bullish on gold — but not for the same reasons.
Some analysts will raise their target based on a reference point of where gold is now, or use common rules of thumb for estimating a peak gold price, such as using a previous high adjusted for inflation, or a past highs in common ratios such the Dow Jones Industrial Average/gold ratio, or the oil-price-to-gold ratio.
“What about looking at [President Barack] Obama's approval rating versus the price of gold,” Mr. Goolgasian, a vice president and senior portfolio manager at
State Street Global Advisors, said today at the Morningstar ETF Invest Conference in Chicago. Many of the commonly used benchmarks, like the Obama/gold ratio are “nothing but spurious,” he said.
Mr. Goolgasian said his bullish view is based on larger economic and political factors. He believes the price of gold has plenty of room to rise, and he thinks investors should hold gold in their portfolios, perhaps through a gold-based ETF. Institutional investors tend to hold somewhere around 30 basis points of their portfolios in gold, he estimated, though he said it is very difficult to get reliable data on institutional holdings.
In general, retail investment managers tend to have around 5% or less of their holdings in gold, which Mr. Goolgasian said seemed about right to him.
Among his audience of about 60, seven held up their hands when Mr. Goolgasian asked how many had an average gold allocation of more than 5%. Mr. Goolgasian said he holds 10% of his assets in gold.
Several economic indicators are bullish for gold prices, he said. Long-term-inflation expectations are bullish, as are near historic low interest rates and the Fed's intention to hold rates low.
Further, he sees no indication that gold prices are in a bubble right now, Mr. Goolgasian said. “The key for every bubble is the introduction of massive supply, that is what peaks a bubble,” he said. “The gold supply is unchanged.”
Gold prices are likely to continue rising, in part because of the weak economy, but also because of political gridlock, Mr. Goolgasian said.
“Have we had any major breakthrough on fixing the debt to deficit issue? None at all,” Mr. Goolgasian said. “We are kicking cans down the road. As an investor, I don't want to see gold do well, because it means as a society, we haven't fixed our problems.”
