As gold slips to new multi-year lows today, Gary Shilling—well-known financial analyst and market strategist—told Financial Sense Newshour that the outlook for the yellow metal is not looking good and not getting any better.
In 2010, as investors were still fearing a rapid rise of inflation, Gary Shilling wrote the book, The Age of Deleveraging, where he forecasted a decade of deflation and slow economic growth that would drag down the price of commodities and other sectors.
Here, Shilling says:
"My thesis in that book...is that we had huge financial leveraging (with) an expansion of mainly debt but also equity financing in the 1980s and '90s, (along with) the US consumer, the financial sector globally and a number of other sectors...and now we're in the age of deleveraging (by) working off this excess leverage."
With Shilling's deflationary, slow growth outlook proving correct over the past five years, where is Shilling putting his money today? On that point, he explains his firm is long the dollar, short commodities, and also holding an "unusually heavy portion of cash" since there's not a lot of clear direction in the market currently.
When asked about gold, Shilling also doesn't see a bright future for the yellow metal, though all the while noting its unpredictability. Here's what he had to say:
"I've always been agnostic on gold because there's so many forces that can push it around. You know, what are the goldbugs doing? How about new mining techniques? India—when they're rich they want gold, when they're poor they downgrade to silver. Inflation, deflation, political risk—I'm just not smart enough to sort them all out but I would note that unless one force dominates as inflation did in the late '70s when gold went to 0/ounce, which would be close to 00/ounce in today's terms, unless you get something like that...gold has basically been declining even in nominal terms and more so in real terms so it has not been a very successful investment. And what's interesting is that gold doesn't return anything so it ought to do very well in a zero interest rate environment."
Given how terribly gold has done, even with zero rates, Shilling said "the threat of interest rates increasing is obviously not good news" for gold investors.
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