In his last newsletter, hedge fund manager and legendary trader Paul Tudor Jones has told his clients that it is now time to buy gold because faster inflation and increased purchases through exchange-traded funds and by central banks increase demand amid stagnant mine output.
Tudor's letter is one of those "must read" as his macro sense is phenomenal and he is one of the greatest traders of all time.
While Tudor says he has never been a gold bug, he says all assets have a time and a place. And he now says that it's now gold time. He joins an army of other prominent hedge fund managers who are bullish on the precious metal including David Einhorn of Greenlight Capital and John Paulson of Paulson & Co.
Tudor's econometric model has determined that gold is 20% undervalued over the next 24 months. This takes into consideration real rates on the price of gold, inflation, and M2 growth. Tudor expects the velocity of money to rise over the next two years, enhancing the bullish case for gold.
On the topic of currencies, Tudor shares the views of many other hedge fund managers in that they feel currencies of commodity producing nations should benefit as demand for metals and agricultural goods remains elevated and foreign investors seek higher yields. He adds that the Australian dollar is well-positioned to benefit from China's inventory build, a robust inbound M&A pipeline and portfolio investments from Japanese institutional investors. The central bank of Australia was the first industrialized country to raise policy rates. The Brazilian real will be similarly supported by an equity pipeline that is well subscribed by foreigners.
Tudor also believes that the US dollar will continue its path lower as global flows seek high yielding assets and sovereign reserve managers diversify their growing US dollar-based reserves.
With regard to equities, Tudor favors emerging markets and in particular Brazil and Taiwan.
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