"The only safe haven that we have is gold," Feinseth said. "You got the momentum of everybody piling in, and the one thing about the commodities markets, they are very trend and momentum-driven."Here are five reasons gold is on a tear:
1. It's a safe havenGold demand typically spikes in times of crisis or uncertainty - especially if equity markets tumble, as they did this year. In March, the price of bullion hit a seven-year high as the coronavirus pandemic intensified in the United States, reflecting anxieties about the abilities of financial systems, particularly central bankers, to survive the economic hit.
2. Sense of stabilityGold is typically insulated from inflation and generalised uncertainty. The precious metal is relatively stable over the long haul, and its value isn't easily depreciated by outside factors or other currencies.
3. Weakened dollarThe dollar has depreciated, and its weakened value makes it more attractive to investors outside the United States and gold cheaper in other currencies. Feinseth said he's been watching the ties between the dollar and sliding interest rates as a gauge of investor interest in gold.
4. Low yieldsSince March, the Federal Reserve has kept interest rates near zero to keep financial markets stable and make borrowing costs as low as possible to shore up the economy. It also decided to buy hundreds of billions of dollars in bonds. That brought yields down, making gold and its lack of yield more attractive to investors
.5. Media coverageThe higher gold prices go, the more analysts and investors talk about it, and the more financial media report on it. Added exposure generally translates to more investor interest; that's why some analysts expect prices to go even higher.
Last month, Phillip Streible, an analyst with Blue Line Futures, predicted gold would hit $US2500 by December next year. Other market watchers believe it could happen as early as next week or by the year's end.
Source: Washington Post (this morning)
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