Gold tops $1,800 and hits highest level since 2011
Just look at the rally in gold.
Gold’s continued surge is a bit curious given the comeback in the broader market. The pop in gold prices earlier this year made more sense since gold often tends to do well in times of financial stress, when fear is prevalent.
After an initial dip following the 2008 Lehman Brothers bankruptcy, gold rallied as the market melted down later that year and into early 2009, for example.
And gold prices hit their all-time high in 2011 after Standard & Poor’s downgraded the United States’ credit rating, amid market jitters about Europe’s sovereign debt crisis.
Gold as a hedge
Mounting anxiety on Wall Street over coronavirus helps explain the surge in gold prices.
What’s going on? Some investors may be hedging their bets. There’s still a lot of skepticism that belies the fragile recovery.
Buying gold could be a good hedge against a potential stock market pullback if the rebound in earnings and the economy doesn’t materialize in 2021 as expected.
Investors also might be betting on an eventual surge in inflation, said Gerald Sparrow, chief investment officer for Sparrow Capital Management, in an interview with CNN Business.
All of this stimulus could eventually weaken the value of the dollar and create higher inflation pressures. And that would be very good for gold.