Today’s savvy investor is returning to gold after years of shunning the precious metal, as the global economy slowly crumbles.
Gold's safe-haven appeal is back in vogue this year amid falling equities and oil prices, lifting spot bullion nearly 6 percent so far this month. Gold dropped 10.4 percent in 2015.
Seeking Alpha’s Nicholas Kitonyi spotlights 3 reasons why now is the ideal time to return to gold:
- The global economy is increasingly showing signs of weakness and gold would be a safe haven.
- After the rate hike, the U.S. economy now must prove that Fed made the right decision at the right time. It doesn't look that way at the moment.
- Geopolitical instabilities across various crucial global economies are making international trade difficult and this is not good for economic growth.
“Investing in gold now can be done by everyone. It is no longer a reserve of the rich. Platforms like Bitgold are making it possible for retail investors like you and me to take the opportunity and hedge against potential losses in the balance sheet of the Federal Reserve over the last five years,” he wrote.
“We are dealing with a collapse in confidence in the public sector. Every day is more clear that QE has failed to improve the economy even with interest rates at zero, so what bullets are left?”
Spot gold was flat at $1,119.46 an ounce early Wednesday, not far below Tuesday's peak of $1,122.90, its strongest since Nov. 3. U.S. gold for February delivery was little changed at $1,120 per ounce.
With risk aversion intact as global growth concerns persist, "I won't be surprised if gold hits $1,150, even $1,200 in the first quarter," Barnabas Gan, analyst at OCBC Bank in Singapore, told
Reuters.
But not everyone is sold on gold as a haven investment.
Reuters' Breakingviews columnist
Swaha Pattanaik says the metal has become “a slightly less trustworthy” safe haven.
“The past decade saw a surge in exchange-traded funds that track gold. This sort of more speculative investor demand nearly tripled to almost a quarter of the market after the financial crisis, according to Natixis analysts. Such buyers are quicker to bail than those who want to hold the metal in physical form, making prices more volatile,” she wrote.
“Gold probably still remains the safe haven of last resort. If there were a real financial meltdown – or a sharp reversal in the dollar’s fortunes – it may regain its shine. That will take grimmer news than the markets have yet had to face.”
(Newsmax wire services contributed to this report).