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Go figure. The otherwise safe-haven known as gold is rallying right alongside an equities markets surprisingly chock-full of momentum even as protests sweep the U.S. and deaths from COVID-19 continue to climb.
Or is it really a shock to see gold prices with an upside bias right now as investors bid up equities?
“Both asset classes are responding well to the fiscal and monetary stimulus programs that have been put out since the COVID-19 crisis in March. It’s the same exact playbook we saw in 2008 when after the financial crisis we saw similar extremely high levels of stimulus put into the market, which benefited both the stock market and gold,” said GraniteShares CEO Will Rhind on Yahoo Finance’s The First Trade. GraniteShares is a key player in advising retail and institutional investors on how to invest in gold through various ETFs.
Gold prices rose slightly on Tuesday to more than $1,750 an ounce. The price of the yellow metal has rocketed by 18% over the past six months. Primary gold ETFs such as the SPDR Gold Shares and Vaneck Vectors Gold Miners ETF have out-performed the commodity itself the last six months — rising 25% and 18.2%, respectively according to Yahoo Finance Premium data.
Besides government stimulus (often seen as bullish for gold investors as it stokes inflation fears) lighting a fire under gold, the recent plunge in the U.S. dollar is also supporting the commodity’s market pros say. In such a dollar weakening backdrop, gold is usually viewed as a good store of value.
Experts like Rhind believe the gold rally has legs left.
“You go all the way back to 1980, which was the previous high in gold before the high we reached in 2011, and in 1980 gold prices reached about $800 an ounce. So inflation adjusted, that price is about $2,500 today. If you look at the all-time high for gold we’re nowhere near that today. And in 2011, the nominal all-time high was over $1,900. Remember gold has not gotten back to that level even right now. So from that perspective, gold is not like other asset classes that are trading at or near all-time highs. So I think there’s still room to go,” Rhind added.