How Coronavirus Might Affect The Gold Market (w/ Raoul Pal & Giovanni Pozzi)
RAOUL PAL: And what about-- what's your view on gold? Gold has been everybody's favorite for a while. What do you think? GIOVANNI POZZI: I'm not a big fan of gold in general as an asset. I like to buy assets which have a value and generate a value for some reason. So, I see it only as a store of value and diversification from the rest of the portfolio, be it a currency, be it an asset, it doesn't really matter. It's gone up a lot. I don't see gold going to 10,000, as someone says. But I think it makes sense to hold some in a portfolio because it certainly keeps its diversification qualities. RAOUL PAL: So it's a portfolio diversifier for. It has value. But as a single asset bet-- which I know a lot of people have got, I see on Twitter, I see it elsewhere-- you think that's not probably the best use of capital. GIOVANNI POZZI: Not the best use of capital, exactly. I don't think it will go down now in the short-term much. I think it will stay here because uncertainty will stay here. And as we know, gold turns out to be a good hedge on hyperinflation and on deflation, so it's not a bad idea to keep some. But yes, as a real asset, not so keen to keeping it forever. RAOUL PAL: So, what is the next phase in the markets for you? Do you think we've got some more downside before stabilizing into this period of time where we don't really know anything? What's your hunch? It's not easy to call, because obviously we've moved very sharply. What do you think? GIOVANNI POZZI: Yeah. Well, my base case is that we won't see a new low on the S&P, which is the first thing we all look at below, them the low of the last quarter of '18, which was 2,300 something. RAOUL PAL: So, you think that support holds, essentially? GIOVANNI POZZI: I think that might hold. I would prepare my portfolio for this not to hold. So, I would prepare my-- I think it's a time of reducing the sizing of the position and of the bets. Reduce the value at risk on the table, because the moves are big enough to make money also with smaller positions. And they're big enough to ruin everybody with large positions. RAOUL PAL: Exactly. GIOVANNI POZZI: So, I think the more you put yourself in a position of not having to be right, to necessarily be right, it's better. And so that's my base case. It depends how it will evolve in the UK and the US, because those are the key markets for the financial markets. So, if it takes a bad angle, as it did clearly in Italy, for the UK and for the US especially, I don't think that support will hold. RAOUL PAL: No. Yeah, I tend to agree.