Is Yellow Metal Becoming More Alluring?

Investors might be in the mood to hoard some yellow metal as stock and bond markets appear to be less attractive. Stock indices are near all-time highs and bonds aren’t yielding as much, so some might believe that’s the way to go. “I agree it’s a bargain,” said Larry Levin of Trading Advantage while speaking on FOX Business Network.

Gold has usually been considered a “flight-to-safety” or a “safe-haven” move over the years, as other investment vehicles become more risky for investors.

We are certainly off the all-time high of $1,923 set in April 2011, as gold did have a significant contraction before the beginning of this year. In fact, gold had declined nearly 30% in 2013-2014 due to expectations for an interest rate increase (which is finally expected to occur later this year), among other things.

“There’s considerable uncertainty as the Fed exit approaches, so one might expect a continued global flight to quality into dollars and gold,” Mike Englund, the Chief Economist at Action Economics said.

Many investors aren’t necessarily leaning toward gold just yet as there's been a very strong dollar of late, but economic data during the summer months should sway investors in one direction or the other.

“If economic reports into the summer provide some clarity on a likely September Fed tightening date, and such data could come at any time, we should see a ratcheting down in stock and bond prices, and a boost in the dollar and gold,” notes Englund. “And portfolio rotations already evident in Q1 should continue to the first Fed move.”

Gold finished higher by about $5 today to around $1194 per ounce.