Merk Funds is one of the biggest names in the currency space, and their products have amassed a fair amount of assets as well as attention from the investing world. But the firm has also begun moving into the gold space by laying out plans for a physical gold ETF (OUNZ). With this highly anticipated fund on tap, many investors have been keeping a close eye on Merk’s outlook on the precious metal, especially in light of the fiscal cliff and its impact on gold [for more gold news and analysis subscribe to our free newsletter].
For the coming fiscal year, Merk had this to say concerning gold.
“We expect the volatility in gold to be elevated in 2013, but consider it good news, as it keeps the momentum players at bay. We own gold not for the crisis of 2008, not for the potential contagion from Europe, but because there is too much debt in the world. We think inflation is likely a key component of how developed countries will try to deal with their massive debt burdens, even as cultural differences will make dynamics play out rather differently in different countries.”
This certainly is an interesting take given that many have been using gold as a defense against a possible global meltdown. Merk seems to be one of the few admitting that holding gold is still a good idea even if markets around the world are not headed for a massive collapse. Instead, Merk’s theory means that gold can still perform well, even if benchmarks around the world surge, as many nations will be forced to face their debts sooner rather than later [see also Investing In Gold: The Definitive Guide].
For the United States that time will come in February, as Congress has already begun debates on the U.S. debt ceiling and spending figures. If the last Fiscal Cliff debate is any indication, this one will come down to the wire, and it could have a marked impact on gold’s short-term outlook. Some have proposed harsh spending cuts, while others have gone as far as to suggest minting one or more trillion-dollar platinum coins to pay off our debt. No matter which camp you fall in, Merk believes that gold stands to be the beneficiary of piling debts in the world’s developed markets.
Disclosure: No positions at time of writing.