GO
Loading...

Gold Bubble To Burst When Rates Rise: Wealth Manager

Gold is currently in a bubble and investors need to apply some common sense when trading it, as it will likely fall on interest rate tightening, according to Yogi Dewan, the Founder and CEO of Hassium Asset Management.

Gold
Jose Luis Pelaez | Iconica | Getty Images
Gold

“Back in the 1990s gold traded at $400 an ounce. It hit $253 in 2001 and is now trading at $1,400 an ounce,” Dewan told CNBC.com on Wednesday.

“This is a bubble and a fear trade,” he said. “As soon as the recovery takes hold and the interest-rate cycle changes you will see mass outflows from gold into riskier assets.”

When this happens, gold will head back towards $1,000 an ounce, he said.

The timing of this move is dependent on when rates, in particular US rates, begin to rise, he added.

He also expressed concern over the price of silver, but it is less worrisome due to industrial demand for the metal.

“Silver is also in a bubble but at least it has an industrial use. We prefer platinum and palladium,” Dewan said.

Contact Europe News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More

Europe Video

  • Steve Pollard of Marex Spectron says coffee shipments from Brazil have been higher than expected, due to previous years' surpluses.

  • Every time the oil price looks positive or stable "out comes something negative," says Richard Mallinson, analyst at Energy Aspects.

  • Russia has been dominating the news recently and its economy is not looking good. Anastasia Nesvetailova, director at City University's political economy research centre explains more.