Gold may be at a six-year high, but at least one market watcher believes it’s “overbought” and that investors need to take some money off the table.
“I think gold may give you a momentary trade for a month or two, but over the history of asset markets, gold has not been a very good performer relative to equities,” Keith Bliss, senior vice president and head of investment banking at Cuttone and Company, said on Yahoo Finance’s The First Trade.
Gold shining brightly
Gold has been shining brightly for ETF investors who are moving back into the precious metal amid heightened geopolitical concerns and expectations for interest rate cuts from the Federal Reserve.
On Friday, investor inflows into the SPDR Gold Trust ETF (GLD) were the largest in nearly three years. “Gold is currently being bought by both ETF investors and speculative financial investors,” according to Commerzbank.
“A perceived slowing economic environment with increased risks can be a good time to gain some exposure to the rare metal,” Lindsey Bell, investor strategist at CFRA Research, told Yahoo Finance’s The First Trade.
Spot gold prices (GC=F) are holding above $1,400 an ounce, a level topped last week for the first time since 2013.
In a note to clients, BMO Capital Markets says, “Momentum on the upside continues to build as escalating tensions between the U.S. and Iran boost demand.”
Citigroup expects the metal to reach $1,500-$1,600 per ounce in the next 12 months, and $1,500 by the end of 2019.
Even if geopolitical tensions ease, analysts point out that dovish central banks around the world will prop up the commodity.
“Any potential declines in gold triggered by de-escalating in tensions over the near term should be mitigated by the expressed easing bias out of major central banks,” says Han Tan, market analyst at FXTM.
Sticking with equities
While Bliss admits that gold is a good way to diversify your investing portfolio, he said investors are getting ahead of themselves with this latest rally.
“Historically, over the past 150 years, equities have returned anywhere from 12% to 15% on average. Gold is still only around 1%,” he said.
“I’ve got some friends who are doomsdayers, and they’ve got some physical gold,” Bliss said. “You don’t have to own the physical gold, GLD is fine, but I would stick with equities. I think [stocks are] going to grind higher through July.”
Alexis Christoforous is co-anchor of Yahoo Finance’s “The First Trade.” Follow her on Twitter @AlexisTVNews.