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In a recent interview with Kitco News, Keith Dicker, founder and chief investment officer at IceCap Asset Management, said the fundamentals for holding gold have strengthened this past year. Still, he added that the U.S. dollar remains a significant headwind for the yellow metal over the next few months.
“Gold is a hedge against geopolitical and financial uncertainty risk and if you are holding gold, then you are feeling pretty good right now,” he said.
However, he added that anyone who missed the 20% rally this summer will still have another opportunity to see some gains, but those investors need to be patient. Dicker’s comments were initially made after gold prices dropped from September’s six-year high, but continued to hold support above $1,500 an ounce.
Dicker said that he thinks the time to get into gold is when tightening credit markets create another financial crisis. He added that the market to watch is Europe. Although credit markets have tightened recently, he said that they are still a little way from a full-blown crisis.
"Right now, everything is functioning well, but when that ball begins to drop, you will see a surge in gold," he said. "Nobody has missed that boat yet."
Of course, before investors pile back into gold, Dicker said that they should pay attention to the U.S. dollar, because that will be the safe-haven asset to move first. He said that a crisis in Europe is going to cause investors to "scurry" into the U.S. dollar.
"No matter how bad the U.S. looks, it looks so much worse everywhere else," he said. "The creation of a Eurozone was an experiment that was doomed to fail from the start."
Looking at the U.S. dollar index, Dicker said that as the expected crisis hits, he could see the index pushing to 120 or 130 points. The index is currently trading at 98.27 points as it has so far been unable to test resistance at 100.
In an attempt to capture the potential rally in the U.S. dollar, Ice Cap, in partnership with Santiago Capital, have launched a long U.S dollar fund.
"The objective of the IceCap Strong Dollar Fund is to provide qualified investors with protection as well as the opportunity to benefit from financial, economic, political and social stress created by aggressive and unorthodox global central bank monetary policies," the company said in the fund's fact sheet.
Although Dicker is bullish on the U.S. dollar, he added that it doesn't preclude him from being bullish on gold.
"The stronger U.S. dollar will be positive for gold because it will show that there are major problems in financial markets," he said.
A critical buy signal for potential gold investors is when the yellow metal can hold its ground on a higher U.S. dollar, Dicker said.
"From a market perspective, an aggressive rise in the U.S. dollar is coming and you need to see gold's reaction to that," he said
