Gold bugs are finally having a moment. The price of gold topped $1,400 an ounce Friday. That’s the highest level since September 2013.
Rate cut hopes have helped push the dollar lower – and gold tends to rally when the dollar gets weaker because that makes it more attractive to foreign buyers.
“Gold, the anti-dollar, is on fire,” noted Kit Juckes, global fixed income strategist at Societe Generale, in a report after the Fed meeting this week.
The continued drama surrounding trade talks between the United States and China is helping push gold higher too.
Unless US President Donald Trump and Chinese President Xi Jinping come to a deal at next week’s G20 meeting in Osaka, Japan, gold prices could keep climbing – especially since the market doesn’t expect the Fed to do anything that would push the dollar higher.
“We expect a dovish Fed, US-China trade tensions and lower real US interest rates to support gold prices,” said UBS Global Wealth Management’s Chief Investment Officer Mark Haefele in a report.
Gold has also been boosted by geopolitical tension with Iran after a US drone was shot down by Iran’s Revolutionary Guard this week. On Friday, Trump tweeted that the United States was “cocked & loaded” on Thursday night to strike Iran before deciding to stand down.
Investors often flock to gold as a safe haven in times of increased volatility because it’s a tangible asset whose value is not tied to the actions of central banks.
“Gold has historically been a pocket of strength in periods where uncertainty increases sharply,” said CFRA investment strategist Lindsey Bell in a report this week.
And as questions linger about how much this epic market rally – now more than ten years long – can last, investors may continue to look at gold as a way to protect themselves in case stocks fall sharply.
Bell added that gold is “a smart and defensive way to diversify a portfolio in the later innings of a bull market for which uncertainties have increased.”