Gold is Glittering

As investors are licking their wounds from last year’s devastating losses in the stock and bond markets gold has quietly become a breakout star. Since the beginning of November through the first ten days of the new year, the precious metal has soared 15 percent, hitting a 7-month high of $1,882 an ounce. And some analysts say the rally is just getting underway.


“As you look forward, you start to look around and think, ‘where is the safest place for your investment in terms of assets?’ and the only place really to go as an alternative now is gold, in terms of knowing that you are not going to see that debasement of your assets,” David Neuhauser, founder and chief investment officer of Livermore Partners told CNBC Europe. “I have liked gold for several years. Looking at the dollar peaking, it has gained a little bit of a liftoff here for the past several months, so I see that continuing for some time.”


Gold has again demonstrated an inverse relationship with the U.S. dollar. The U.S. Dollar Currency Index, which measures the greenback against major foreign currencies, has fallen seven percent since early November as gold has climbed upward. Indications that the U.S. Federal Reserve may be slowing its interest rate hikes, as other central banks are aggressively raising rates, have helped halt the dollar’s ascent. When the dollar declines, gold becomes more affordable to foreign buyers since it is priced in dollars in international markets.


At the same time, the Federal Reserve is intent on slowing the U.S. economy as it battles inflation, which could prove bullish for gold argues J.P. Morgan precious metals strategist Greg Shearer. “A harder-than-expected economic landing in the U.S. would not only attract additional safe haven buying, but the rally could become supercharged by more dramatic decreases in yields if the Fed more rapidly unwinds tighter fiscal policy,” Shearer told CNBC.