Gold has risen nearly 24 percent this year, and analysts see it going higher. But the precious metal may be better as a trade than an investment, as Fred Katayama reports.
Gold’s golden rally
Gold’s returns this year have been nothing short of golden, rising nearly 24 percent. The push by central banks to lower rates and political concerns like Brexit have spurred investors to buy the precious metal, including big guns like bond king Jeffrey Gundlach and hedge fund manager Stanley Druckenmiller. Also making gold look relatively attractive: high prices for the other safe haven, U.S. Treasuries, as bond yields stay near record lows.
Some strategists warn gold is good as a trade but not as a longer term investment. U.S. Bank’s David Schiegoleit:
SOUNDBITE: DAVID SCHIEGOLEIT, MANAGING DIRECTOR, U.S. BANK PRIVATE CLIENT RESERVE, (ENGLISH) SAYING:
“As we continue to see the Fed again back off some of those threats to raise rates, that’s lending a good bid to gold. And that could continue as a trade.”
Gold tends to have an inverse relationship with the U.S. dollar. And the dollar could rise against other currencies once investors are convinced the Federal Reserve will resume raising interest rates.
So financial advisor Ross Gerber doesn’t recommend that Americans invest in gold but thinks it’s good for those holding other currencies.
SOUNDBITE: ROSS GERBER, CEO, GERBER KAWASAKI, (ENGLISH) SAYING:
“If you’re not holding dollars, which is everybody else in the world, gold is a very attractive investment because as the currency like the euro and the pound continue to lose value and will continue to lose value, you’ve got to put your money elsewhere that’s not going to lose value, and that’s gold.”
Traders and analysts polled by Reuters in July see gold going higher, rising a further three percent to $1,363 an ounce next year.