Harald Seiz: Gold is the right choice
Harald Seiz has what some would call a vision, or others might call an analysis of the potential development of global financial markets. Not unlike many businessmen, economists and investors around the world, Seiz realizes that the importance of gold rises when the confidence in the economy dwindles. For him gold is one crucial component for financial independence and social security in the truest sense of the word. He realizes that he is not the first person to have had that revelation, but he has been an unwavering supporter of the precious metal even when it has fallen out of favor with investors and the financial markets. Seiz doesn’t consider gold a passing fad, he sees it as a versatile tool that can be implemented in many ways. Harald Seiz about his outlook on gold in particular and the immediate consequences of the current pandemic on the global economy and financial markets.
Mr. Seiz, why do you think that gold is a good investment in a market destabilized by the Corona virus?
Well, first of all, gold is and has been synonymous with value, financial security and predictability for literally thousands of years. These traits tend to be amplified in times of crisis. One of the aspects that give gold an advantage as a store of value is the negative interest that is currently garnered by people who loan the government money. When the yield of government bonds is positive, you are hit with fees that are called “opportunity costs” for holding gold, because the state or government sees it as money lost, because you didn’t invest in them. Now, with negative interest probably here to stay for the foreseeable future, the opportunity costs turn into opportunity earnings or profits. That in itself makes gold attractive for people looking to strengthen their financial basis.
For which kind of person or investor is gold a suitable store of value?
Gold is in general a reasonable and by and large low risk commodity and asset. Since the beginning of 2020 the German stock index has risen by about 40%, which is impressive if you consider the dire macro-economic situation we’re in globally because of the pandemic.
The problem is that the average price level for stocks was high to begin with. So for one thing, many people just cannot afford to invest in low risk stocks because they are simply too expensive and on the other hand, buying at these high rates might not be the wisest thing to do, because the profit potential is limited.
Gold on the other hand, regardless of its current market value, has one key advantage in comparison with stocks; it actually is a currency. When worse comes to worse, you can pay with gold coins, bullion and so on. You can trade it for products and services. That in itself, for me, makes gold incomparable.
So to answer your question, gold is suitable for people who want a versatile and relatively low-risk store of value. I believe it is the right choice.
The gold price is hovering around $ 1.700 as we speak. How do you estimate the price of gold developing over the second half of 2020?
Just like everyone else, I don’t have a crystal ball. There are so many factors that play into the price development of commodities, stocks and the stock markets in general.
There are however two developments I have been noticing. For one thing tracker funds have been registering a large influx of money with which they purchased about 300 tons of gold. These tracker funds have really been pushing the gold price over the last six months. The other factor is the possible resurgence of a global inflation. The central banks and governments are bringing huge amounts of money into circulation to jump-start the economy. So we have a limited supply of goods and services and at the same time a great increase in money in circulation.
These aspects will bolster the value of gold.
So you do see the price of gold rising?
In April the Bank of America surprised everyone with their gold prognosis of $ 3.000 per ounce over the next 18 months. Now we have to be careful with these types of predictions, because you never know if someone is trying to influence the markets in a certain direction. And again these are uncertain times and I’m pretty sure the Bank of America doesn’t have a crystal ball either.
On the other hand they probably don’t want to make fools of themselves by totally missing the mark on their financial outlook. So probably the price of gold will remain stable and positive for people who add gold to their portfolio as a store of value.