That “barbarous relic” is what John Maynard Keynes famously called gold. But despite the celebrated 20th century economist’s scorn for the precious metal, which for years underpinned currencies worldwide, its popularity has never ended. Despite ebbs and flows, it remains a sturdy asset class.
So today, amid all manner of economic worries and international tensions, investors once again are turning to the glittering metal as a haven, with the gold spot price hitting $1,400 an ounce Friday before closing at $1,396. Although its price may be volatile over time and it generates no interest or dividends, this particular commodity has great appeal when people are wringing their hands.
In passing the $1,400 level for the first time since September 2013, gold’s rally shows every sign of continuing, according to numerous forecasters. The metal’s price and that of an exchange-traded fund that tracks it mark “a breakout and potentially a leg nicely higher,” Bespoke Investments writes in a research note.
The Australia and New Zealand Banking Group expects gold to reach $1,500 next year. Citigroup thinks that will happen by year-end. Already, gold is up 9.22% in 2019.
“Gold does well in a period of dollar weakness, inflation, and economic uncertainty,” Peter Schiff, chief global strategist for Euro Pacific Capital, told Barron’s. “We are about to get all three. “
Well, the dollar has dipped a bit lately amid talk of the Federal Reserve lowering short-term interest rates. And global economic growth appears to be decelerating— with the threat posed by the US-China trade war a factor. Inflation, though, seems to be stuck below 2% annual growth in the US, Japan, and Europe. Still, two out of three ain’t bad.
This century has given gold quite a ride. In the 1990s, it was almost laughable. Gold’s spot price was $260 in 1999. But then the dot-com bust, the housing crash, the financial crisis, and the Great Recession sent the metal soaring. It peaked in 2011, amid the European debt mess, at around $1,900.
As economies improved all over the globe, it slid to about $1,200 in 2015, popped up a bit to $1,350 during the oil slide that followed, and drooped anew to $1,200 last summer.
Then it began its current romp. Euro Pacific’s Schiff called gold “the ultimate safety net.” As long as people believe that, it never will be a relic.
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Tags: Commodities, Financial Crisis, gold, John Maynard Keynes, Trade War