There’s No Reason To Pile Into Gold Right Now – Wharton Professor

(Kitco News) – Despite the potential threat of a 10% correction in equity markets as a result of growing U.S. political risks, one economics professor says that there is no need for investors to jump into gold.

Jeremy Siegel, professor of finance at the Wharton School of University of PennsylvaniaIn an interview with Bloomberg Tuesday, Jeremey Siegel, professor of finance at the Wharton School of Business, said that that the future of the equity bull market, which has hit new records, is all dependent on President Donald Trump.

“If Trump follows the Republican agenda of lower taxes and lower regulations, we could easily go 10% higher from here. If he veers into protectionism and currency manipulation, we could go 10% lower,” he said.

Siegel added he is surprised to see the CBOE volatility index, the VIX, is extremely low levels, currently trading just above 11 points. The market’s next move, he continued, is essentially a coin flip.

“One reason the VIX is low is just a reflection of the fact that there is more confident. The bulls are coming out; there is less fear of a market drop,” he said.

He warned that if Trump pursues his protectionist policies, he could see the VIX index rise to 14, or even 16 points.

However, despite the short-term fragility in equity markets, Siegel is indifferent to the yellow metal, mostly because there are no signs of inflation.

“Inflation data, although it did move up, it is very modest, the dollar is strong… so really there isn’t a lot of inflation and there is not a reason to all crowd into gold at this time,” he explained.

Despite the extended values in equities, Siegle said that he prefers equities as a long-term investment.

“I think the market is a compelling value in the long run because I don’t think interest rates are going to rise very much,” he said. “I’m definitely for stocks in the long run but I do see two potential paths of gain and loss…”

While equity markets have hit new records Tuesday with the Dow Jones Industrial Average hitting a session high of 20,155 points, gold has also managed to attract investor attention. April Comex gold futures settled Tuesday near a three-month high at $1,236.10 an ounce, up 0.33% on the day.

Despite the new all-time highs in the DJIA, gold has outperformed the market. The Dow is slightly more than 1% higher since the start of the year, with gold up more than 7%.