Crispin Odey is a British economist and businessman and one of Europe’s hedge fund managers. He has claimed that governments can ban private ownership of gold if they lose control of inflation following the coronavirus crisis.
Odey stated that it is not surprising that people are buying gold. But at some point, the authorities may try to demonetize it. This would make it illegal to own it as a private individual. According to the economist, they will only do it if they consider there to be a necessity to create a stable unit of account for global trade.
Odey is a staunch critic of the policies of the central bank, as he is known for his apocalyptic predictions. He increased gold’s position in his Odey European Inc. fund during April. June gold futures holdings represented 39.9% of the fund’s net asset value at the end of the month, up from 15.9% at the end of March. A stake in Barrick Gold Corp., the world’s No. 2 gold miner, was its most significant long equity position.
The fund, which gained 21% in March, was down 9.5% in April, according to the leaked letter to Bloomberg.
Fear of government confiscation is a common theme among some of gold’s most fervent supporters. They point to a precedent for the forced purchase of private bullion in 1933 by the United States government. The country did it as the basis for a devaluation of the dollar. The price of gold rose from $20.67 an ounce to $35, and it remained at this rate until the United States ended the gold standard in 1971.
Today, as the significant currencies are no longer tied to gold, there is no indication that governments or central banks are considering a similar move.
Gold will see profit as high inflation follows the coronavirus crisis
Odey had previously compared the current pandemic to the Great Depression of the 1930s. He argued that central banks could not contain inflation as the economy finally recovers from the impact of global blockades. He stated that history is full of examples in which the rulers, in times of crisis, resorted to degrading currencies. Odey is not alone in betting that gold will profit as high inflation follows the coronavirus crisis. However, market measures of inflation expectations show that this is far from the consensus opinion.
High inflation would hurt long-term bonds and growth stocks, Odey predicted. To indicate this, he cited forecasts for inflation rates of 5% to 15% in 15 months. He hopes that the authorities fight these prevailing trends every inch of the way. However, he also hopes that they lose the fight.
Odey is known for his flashy comments and bearish outlook on the market. In 2016, he predicted that a possible recession and higher inflation after the Brexit vote could lead to UK stocks falling 80%. The following year, he advised investors to watch out for the “Minsky moment “. The economist was referring to the term inspired by economist Hyman Minsky to describe a sudden market crash that follows credit depletion.
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