CNBC interviewed Anthony Scaramucci, managing partner of SkyBridge Capital, on the reason why hedge funds are selling gold and why he believes the smart money won’t be returning any time soon:
Scaramucci believes that “when they write the history of this period,” financial historians will remark that “gold should’ve worked, it could’ve worked, it would’ve worked, but it didn’t work in this environment.”
The four reasons according to Scaramucci why hedge funds have exited the market are:
- Central bankers are exercising caution on inflation and the risk of Weimar-style hyperinflation is just not there.
- Deflation has become a risk and “as each dollar becomes more valuable, the dollar value of gold drops.”
- The Fed won’t sell its bonds thanks to the institution’s very long time horizon and the absence of a bond bubble is negative for gold.
- Economic growth would hurt gold “because rising rates make gold, which does not produce yield, even less attractive in comparison to bonds.”