PIMCO's Greg Sharenow reportedly said that despite the recent decline in prices, gold still looks expensive and might even witness further losses although long-term appeal still remains.
Sharenow said persisting inflation will make it difficult for the Federal Reserve to meaningfully trim rates, according to a report by Bloomberg.
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Gold is modestly over-valued versus inflation-linked government bonds, or TIPs, and those are probably better valued in multi-asset portfolios for now, he said. Real bond yields are likely to stay higher for longer, Sharenow noted.
Spot gold was trading 0.1% higher at $1,964 per ounce during Thursday afternoon Asian trading session. Strong labor data released Wednesday sparked investor concerns about further rate hikes by the Fed. There were 1.8 job openings for every unemployed person in April, up from 1.7 in the previous month.
Price Action: Gold is still trading over 15% higher than the lows seen in September last year. The SPDR Gold Trust GLD and the iShares Gold Trust IAU gained over 6% since the beginning of the year. "The biggest challenge one has right now is to figure out the lagged effects of any credit tightening that is coming from some of the central banks," stated Sharenow. "The uncertainty band still remains fairly wide."
However, the executive believes the long-term outlook for gold looks upbeat as central banks look to diversify holdings away from dollar assets. "The safety and security of gold right now have a high currency to them," he said, "There's a lot of countries that are questioning their dollar reserves."
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