According to Michael Lee, the Founder of Michael Lee Strategy and a 20-year Wall Street veteran who previously served as Executive Vice President at Morgan Stanley, gold will run high. That’s why Lee reserves a valuable stock in gold in the portfolio.
“Gold is on the verge of a breakout of up to $5,000!”
According to Wall Street veteran Michael Lee, gold will reach $5,000 in the next bull run as inflation rises and the US dollar weakens. Lee says he will add 15% gold to his portfolio. In this context, Lee shares his predictions:
We are on the verge of a breakout where gold can reach as high as $5,000. I think the dollar is nearing its peak. When you see the dollar turn on the contrary, you can see that when gold goes above $2,000, it really starts to rise. Given the coin size we’re printing, I have no idea why gold isn’t above $4,000 right now.
“You become a banana republic when your currency is worthless”
Michael Lee argues for gold’s role as an inflation hedge. The latest headline Consumer Price Index data shows that the annual inflation rate, which was 7.1% in November, dropped to 6.5% in December. The Federal Reserve increased interest rates by 425 basis points last year to curb high inflation, which peaked at 9.1% in June. Lee argues that if the Fed fails to control inflation, it will ‘tear apart society’. In this regard, he makes the following statement:
The Fed will likely go too far in its restrictive policy because it knows the dangers of inflation. You become a banana republic when your currency becomes worthless.
“Fed pivot not possible!”
“Those who argue that the Fed will soon return from its restrictive policy stance are smoking,” says the Wall Street veteran. He explains his views on this matter as follows:
There is a lot of work to be done before the Fed becomes accommodating and indeed begins to pivot and cut back. If the Fed cuts too soon, or reverses things too soon, and we hit a double top in inflation, think about the devastation… Think about how little credibility the Federal Reserve is as an institution right now, and the less credibility they’ll have if that happens.
Lee argues that the Fed will have to ‘squash demand and cause a recession’ to push inflation to its 2% goal, and will not pay attention to downtrends in the markets. He then makes the following statement:
The Fed will not give up on its 2% target as it harms the S&P 500. Gone are the days when Fed executives bought and sold their individual accounts based on announcements to inflate the S&P 500… According to the reading form of the bond market, I don’t think we’re going to get this pivot until we experience a rather unpleasant calm.
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