Is it time to buy gold? Wall Street pros weigh in as prices fall

Published Mon, Oct 10 202210:03 PM EDT

Gold prices slid to a one-week low Monday as concerns mounted that the Federal Reserve would stay the course on its aggressive pace of interest rate hikes after strong U.S. jobs data Friday . The precious metal has come under pressure this year, with the dollar's big gain weighing on gold prices. While gold is traditionally seen as an inflation hedge and a safe haven in periods of economic turmoil, a stronger dollar makes gold more expensive for non-dollar buyers, dampening demand for the precious metal. Spot gold was trading down 1% at $1,676 per ounce Monday — near a 2.5-year low. So is now the time to buy? CNBC Pro asked several market watchers for their thoughts. 'Historical bull market' For Euro Pacific Capital's Peter Schiff, the case for buying gold is contingent on the Fed's determination to quash inflation. "I think central banks are about to throw in the towel on the inflation fight. I think inflation is going to win. We're just getting started, inflation is going to ravage some of these major economies for years to come," Schiff, who is chief economist and market strategist at the investment advisory firm, said on CNBC's "Street Signs Asia" last week. While the U.S. dollar may be favored by some as a safe haven in times of economic uncertainty, Schiff instead sees the dollar as the "epicentre of the next crisis." He believes investors should instead "seek refuge" in gold, which has served a "unique role" throughout history as a store of value. "I think a lot of people are going to end up getting out of fiat currencies and into real money. I think we are in the early stages of what's going to be probably a historic bull market in gold," he said. "The logical place for them to go is gold and in a big way," he added. Gold has 'no guarantee' But Bart Melek, head of commodity strategy at TD Securities, believes that while inflation will not be easily tamed, the Fed is not "giving up the fight." He thinks this could mean higher interest rates for most of 2023. Higher real rates imply a higher cost of carry for gold, due to increased competition from higher-yielding investments. Investors are thus likely to reduce their exposure to gold, according to Melek. Hedge fund manager David Neuhauser has a similar view. "I am a gold bull. But recent events, especially with the dollar gaining a lot of steam, have created a massive headwind for gold. Historically, it does really well when rates are negative, and it does really poorly when rates are high," he said. He believes the global economy could potentially descend into stagflation, should higher interest rates curb economic growth while failing to rein in inflation — a scenario he said "is really good" for gold. Neuhauser, whose firm owns stakes in Toronto-based miner Amaroq Minerals , believes gold has "stood the test of time" and "has a place" in everyone's portfolio — particularly given today's market conditions. "When you look at some of the valuations of some of the gold miners, they are extremely cheap. You just can't print any more gold unlike a lot of other things. You could print securities, you could print money, but you can't print gold, and there are less mines and even fewer new discoveries out there today," he said. "Owning a gold mine that's printing cash in a safe jurisdiction with a really good asset is something where you should be invested in today," he added. Read more Is it time to buy the dip? These stocks look set for big upside, according to Wall Street Fund manager says oil is in a multi-year bull market – and names 3 stocks to cash in Goldman says these 'cheap' global stocks are set to win in the short and long-term George Cheveley, a portfolio manager at asset management firm Ninety One, believes gold equities are a long-term holding for any investor. "They are something you keep in your portfolio, because when you need them, they work and that's the history of gold and gold equities. We have seen that many, many times," he said. He acknowledged that gold equities can be inherently quite volatile, but said these companies deliver good returns over the long-term — irrespective of what happens in other markets. Price upside Gold has lost approximately 7% of its value this year, but Cheveley believes the precious metal has managed to hold its own. "Gold prices are down marginally but have done much better than most asset classes in the face of aggressive tightening and a very strong dollar," he said. He added that he continues to see a "very strong" market for gold and gold equities over the longer-term. Joni Teves, precious metals strategist at UBS Investment Bank, believes gold should see a recovery into year end, with prices set to trend higher over the course of 2023 as inflation and monetary policy ease. "Once we get to that point where tightening stops, and potentially depending on how economic data plays out, there's room to shift back into easy mode to support any weakness in growth and that should create a more positive backdrop for gold," she said. Teves has a price target of $1,800 per ounce for gold into the end of the year and expects the price of the precious metal to move towards $1,900 by end-2023. "So, upside but not overly bullish ... I think the point where it gets a lot more bullish for gold is if we are starting to think about quantitative easing and if the economic weakness is much more dramatic," she added.