Matsuda Global has told clients with gold holdings to remain calm after prices dipped below $1100 for the first time in 5 years early last week. The firm issued a mid-week investor alert outlining its views on the reasons for the sharp selloff and advised clients that a turn in gold’s fortunes was inevitable.

“As you’ll know, we still firmly believe in the long-term secular bull market in gold. We don’t believe that the Fed and the other global central banks have fixed the issues that caused that great financial crisis and, if anything, the methods they’ve used to address those issues have actually served to exacerbate the situation,” said a “Matsuda Global” analyst.

The firm reiterated its view that the US Federal Reserve will be unable to increase interest rates to any significant extent and that any hike would likely be symbolic.

“There’s no scenario that we can see in which the US economy continues to grow in anything but a near-zero interest rate environment so investors expecting a return to normal interest rates around 3-4% really need to think again. Once this becomes apparent – perhaps by September or October – and people realize there’s no hike on the way and, in fact, that the Fed may need to reintroduce stimulus, gold and other metals will resume their upward trend,” said the Matsuda Global analyst.

The Asia-based investment boutique believes selling was triggered by a lower than expected print on China’s official gold reserves. The country’s central bank confirmed it holds 1,654 tons compared with the 1,054 tons it confirmed the last time it published the data in 2009.

Matsuda Global says it expects the metal to remain under pressure in the short term but to recover strongly in the medium-term.