Stocks (^DJI, ^GSPC, ^IXIC) plunge as turmoil triggers a flight to safety. The sinking price of crude, concerns over the health of European banks, and uncertainty in China are sending shockwaves throughout the global markets. So how can investors play recent volatility?
It’s time to turn to gold, according to Anthem Blanchard, CEO of Anthem Vault. He thinks the precious metal’s rally still has room to run.
“It’s not over yet. We’re seeing increased credit risk, news about Deutsche Bank’s derivative book, and negative interest rates on the Japanese 10-year bond for the first time ever,” said Blanchard. “I think there’s a lot of credit risk in the market, and I think gold is benefiting.”
Gold has surged to its highest level in more than a year as prices soar above the $1,250 mark. It’s on track for its biggest daily rise since Dec. 1, 2014.
“You have an environment where you have real negative interest rates, and you have inflation on top of that,” said Blanchard. “It’s an environment where people are getting penalized for having their funds in a bank account. Where’s the incentive if you’re not getting yield? Gold all of a sudden looks much more attractive when you have this great storing value.”
The Federal Reserve’s cautious comments have spooked the markets, and now the fed fund futures contracts do not anticipate that the Fed will raise rates until at least February 2018.
“The reason why gold is doing so well is because of the market’s concern that the Fed is a little unsure of policy,” said Blanchard. “We saw a quarter-point raise in December, and now we’re seeing backtrack on that. This is what’s concerning the markets.”
And money is pouring into gold-backed exchange traded funds. Last week, SPDR Gold Trust (GLD), which is the world's largest gold-backed ETF, rose by more than 4%, its biggest weekly rise in nearly seven years.
“You’re seeing a lot of momentum and flooding into gold funds when we see prices spike like this,” said Blanchard. “I think these levels are attractive in gold. There’s still time to buy.”