De-Dollarization Means Gold is Underrated and Has a ‘Long Way to Run,’ Says Bridgewater’s Co-CIO

Gold could be at the start of a lasting growth period as global de-dollarization trends continue, Co-CIO of Bridgewater Associates Karen Karniol-Tambour said.

Gold has historically been attractive when interest rates are falling, but she thinks there's now more to the precious metal, setting it up for a bullish outlook.

"Gold is underrated. It's got a long way to run," she said Tuesday at the Sohn Conference, according to Kitco News.

This comes as some countries look to reduce their reliance on the US dollar, which is dominant in international trade and traditionally is seen as a pillar reserve asset for central banks.

But Western sanctions on Russia that froze its foreign currency reserves highlighted the risks in using dollars. And since Russia's invasion of Ukraine, more countries have turned to China's yuan or other non-dollar currencies for trade deals.

Meanwhile, central bank purchases of gold have soared in the past few quarters as they rush to stockpile it in their reserves.

Karniol-Tambour said this also has the potential to change investor sentiment around gold, namely its perceived opportunity cost as a non-yielding asset.

"This geopolitical turmoil is not going away," she said. "This is a slow-moving secular support for gold."

Meanwhile, with inflation still relatively elevated throughout global markets, gold is primed to continue attracting investors as a hedge against purchasing power erosion.

Consumer inflation in the US has slowed down sharply from last June's high of 9%. But the most recent CPI data for April put inflation at 4.9%, which is still well above the Federal Reserve's target of 2%.

"The fact that inflation is so volatile raises the probability that you are going to get some version of a debasement event where you lose your real purchasing power," Karniol-Tambour said.