Many are parking their funds in government backed bonds, which are now yielding negative interests in a few places in Europe. A few bold investors placed a bet on oil early on this year and have enjoyed the rally, but that too is poised to hit a brick wall. The only asset left that has seen a 28% gain this year, and is the bulwark of bearish strategists, is looking right now like the asset of the year. Gold is amongst the few assets that is helping investors pull through the irrationality in the market.
There are a myriad of reasons to believe that gold will keep on advancing in the days and weeks ahead. Assuming that Brexit was the biggest test to the strength of gold markets this year, the next test ahead will be Friday’s US job report. If job creation was weak, and inflationary pressures in the US remain weak, the Fed will be less likely to hike rates more than once until the end of the year, if it hikes them at all. That outcome will boost the value potential of a non-interest bearing asset like gold.
Besides the jobs report on Friday, the months ahead don’t seem to augur particularly good news for the markets. That is why there will probably be another small gold rush later on in the year. Other precious metals might also be a viable option for investors seeking a somewhat greater risk, and certain currencies that are heavily influenced by the value of gold might also present a good opportunity, especially if the Fed keeps interest rates at their current level for longer.
However there is no doubt that gold will be amongst the top performing assets this year. Investors should be reconsidering their strategies if they are not buying gold or gold related stock.
