The S&P 500 has almost fully recovered all its pandemic-fueled losses from earlier this year and U.S. Treasuries have seen yields fall across the yield curve, which increases prices, but neither asset class comes close to the performance of gold.
The precious metal and traditional inflation hedge has climbed to a record high in price, topping $1,950 an ounce in the spot market on Monday morning. Michael Hartnett, chief investment strategist for Bank of America Global Research, reports that year to date through July 22, gold prices have surged 22.5% compared to about 6% in government and investment-grade bonds and a 0.2% decline in global equities.
His latest “Flow Show” report shows weekly flows of $3.8 billion into gold, the second largest ever for the yellow metal. The firm’s “all-weather” portfolio consisting of equal quarterly splits between stocks, bonds, cash and gold rose 18% in the past 90 days, which is “astounding and abnormal” given its 7% historical annual average increase, writes Hartnett.
Gold is “marching toward $2,000 an ounce” between the end of September and end of December, writes UBS Chief Investment Officer Mark Haefele, in his latest investment note, which revises a previous $1,900 per ounce target.
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Underpinning gold’s price gains, according to Haefele, are its“negative correlation to real interest rates and the dollar,” which have fallen; rising geopolitical tensions, especially between the U.S. and China; and limited supply growth due to restrained capital spending by mining companies.