Zhitong Finance APP learned that John Hathaway, senior portfolio manager at Sprott Asset Management, said in a report last Friday that he believes that the US dollar's position as a safe haven currency will inevitably collapse and gold will re-play this role.
Since the beginning of this year, the tough stance of the Federal Reserve continues to put pressure on gold. Coupled with the disappointing performance of gold under inflation, the US dollar seems to have replaced gold as a safe-haven option. However, John Hathaway believes: "The US dollar's lifeboat is no longer safe. The process of waiting for gold to be rediscovered as a safe haven is about to end."
John Hathaway said that the strengthening of the US dollar is a "protected" and quoted Mohamed A. El-Erian, chief economic adviser of Allianz and a well-known economist at Wall Street , pointed out that the strengthening of the US dollar is a nightmare for the global economy. He said that as of October 3, 2022, U.S. government bonds have fallen 12.47% this year, a sign that the dollar may not be as good as people brag about it.
He said: "The dollar strength is a mirage. This is the opposite image of all other currencies' weaknesses. In our opinion, the dollar's destruction ball is likely to represent the last line of defense for the banknote, all of which are increasing fiscal recessions."
As the Fed continues to fight inflation, John Hathaway pointed out that U.S. Treasury yields will accelerate from the current "slow rise" of 8.7 basis points per month, plus the fiscal deficit, which is equivalent to an additional fiscal deficit of nearly $300 billion. "What is likely to accelerate this monthly growth is the continued tough stance of the Federal Reserve and the practice of foreign holders selling U.S. Treasury bonds to defend their currencies," he said. Ralph Axel, interest rate strategist at Bank of America , believes that the liquidity of the U.S. Treasury bond market has declined and there is a catastrophic real estate bubble that is more severe than in 2004-2007. According to Ralph Axel, John Hathaway believes that there may be a historic mismatch between supply and demand. "When the Fed began its anti-inflation campaign, it may have made a decision to make damage to the U.S. stock and bond markets, but we believe it is ignorant of the impact of rising interest rates and liquidity depletion on the economy."
As the Fed's fight against inflation may lead to a hard landing in the economy, gold and mining stocks may predict a policy turn ahead of schedule. "Risk/rewards are asymmetric," John Hathaway said, adding that the fundamentals of gold and gold stocks are strong, which makes them likely to be rediscovered at any time and restore their consistently safe-haven position.
