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Stocks down but gold isn’t; here’s why gold’s back in vogue

Pras Subramanian

From the classrooms of FIT to the ateliers of Paris, students and designers alike will tell you fashion is cyclical. 'In with the old, out with the new' is part of the business, but one could say that about certain assets in the investment world, specifically gold (GLD). A year after getting sent to the return bin, gold’s back on many investors must-have list, making a steep run to 6-month highs.

Keith McCullough of Hedgeye Risk Management told Breakout he was buying gold back in in January, and he’s reiterating that call again. In the attached video, he sees the same bullish pattern for gold he saw forming a few years back.

“In the beginning of 2011 what you started to see was the confluence of two major global macro factors that really paid gold bulls, which are dollar down and rates down,” he says. “That was a clean cut signal that U.S. growth was slowing,” and gold was looking like attractive safe haven.

Now in 2014, with gold outperforming most asset groups, McCullough still sees some upside. “This is much like 2011… I do see gold making a series of higher lows and higher highs, you can easily get into the mid-1400’s in here in fairly short order.”

As for his call that we would see higher inflation in 2014, McCullough is sticking to his guns, despite government data showing minimal changes in prices. He sees inflation already, with “the most glaring [example] in food prices… The CRB foodstuffs index is up around 15%, the CRB commodities index (CRBQ) is up 11%.” He continues, “the reality is we’re seeing wage inflation for the first time in a long time.”

With inflation coming on, this is another positive sign for gold. In terms of ancillary plays McCullough advises against buying the gold miners, and says to just buy the precious metal on its own.

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