Gold is Glittering

The highest inflation in three decades has ignited a new rally in gold, triggering a chorus of bullish calls from Wall Street investment strategists.

“Gold can still glitter,” declared Peter Boockvar, Chief Investment Officer of Bleakley Advisor Group, urging clients to buy precious metals. “In response to the continued rise in inflation and continued fall in REAL interest rates, buy gold and silver.”

Gold closed in New York on November 3 just below $1,764 an ounce. Over the course of the seven subsequent trading days, gold jumped $100 an ounce to the tune of a steady drum beat of reports revealing rapidly rising inflation, most notably the consumer price index report that showed annual inflation rate running at 6.2 percent for the 12 months ended in October, its fastest pace in 31 years.

“The risks are that this inflation could prove quite persistent, surprise to the upside, like it has recently, for a long period of time. And suddenly the existence of gold in a portfolio makes a lot more sense,” Goldman Sachs research analyst Damien Courvalin told Bloomberg Television. 

For much of 2021, the price of gold had been restrained as investors focused on concerns the Federal Reserve might hike interest rates. The central bank, though, has indicated it is willing to let inflation run hot and does not plan to hike rates until well into 2022, a positive for non-interest-bearing gold.

“We believe that precious metals are set up for a squeeze higher,” Sprott Market Strategist and Senior Portfolio Manager Paul Wong advised clients in a recent note.

If inflation remains elevated in the coming months, proving more persistent than the Fed’s expectation that it will be transitory, that squeeze could push gold significantly higher.