Gerry Sparrow: Fed and consumer demand will lift gold prices

This has been a dreadful year for gold investors. The price of the precious metal has fallen 25% during the first half of 2013—the biggest tumble since 1981. Yet none of this fazes Covestor portfolio manager Gerry Sparrow. His message to investors: “Don’t sell now.”

Gold Price in US Dollars Chart

Gold Price in US Dollars data by YCharts

In an interview with the St. Louis Business Journal, Sparrow said the two biggest drivers of gold are monetary policy and demand by consumers on the one hand, and industry around the world on the other. Both factors still look positive, according to Sparrow, who is the founder and President of Sparrow Capital Management.

As he puts it: “The economies of China and India slowed in the first half, and both are gold buyers for industry and for the love trade. In the second half, China and India will pick up.”

Sparrow also believes the Fed’s recent statements that it would continue its aggressive bond buying for now will help stabilize or increase the price of gold. Fed Chairman Ben Bernanke’s comments today about the continuing need for bold monetary policies in the U.S. would seem to confirm that view.

Sparrow is long gold via GLD in his Hard and Soft Commodities portfolio.