Gold has been on a hot streak this year, up over 17% and posting a record high. Carley Garner, Senior Strategist and Broker, DeCarley Trading joined TheStreet to discuss what’s behind the recent rally.
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Full Video Transcript Below:
CONWAY GITTENS: Can you just give us the mom and pop reasons so that people can understand what exactly is driving the rally to record highs?
CARLEY GARNER: If you want to talk about the big picture, what was holding gold back a couple of years ago was higher interest rates and a higher dollar. And those two things are starting to work themselves out. Interest rates are still really high, but I think they appear to be on their way lower. And I'm of the camp that the Fed will start lowering rates sooner rather than later. And I think the interest rate market, the treasuries will follow suit. And if that's the case, it makes gold more attractive. And the reason being gold doesn't pay dividends. Gold is a portfolio diversifier. It can do well when other assets are struggling and vice versa, but it doesn't pay dividends or interest.
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So when interest rates are high, people have an incentive to put their money in instruments that do pay interest like treasuries as opposed to gold. But now if we see a normalization in interest rates, that'll put a little more it'll entice people to allocate a little more money to gold, and that should give us a little bit of a sport. Also, the higher dollar, the dollar index is trading around 103, 104, which is, it's lower than we've seen it for the last couple of years. But the reality is it's still really, really high. We probably are in store for a repricing in the dollar somewhere into the I want to say low 90s. And if that is the case, all else being equal, that too will allow gold to move higher. And so we've seen some of this start, but we haven't really seen it fully developed yet.
CONWAY GITTENS: And so how much does geopolitics play into this as well?
CARLEY GARNER: I think that's a really - a very good point. When there's a lot of uncertainty economically or politically, a lot of people put their money in safe havens. We've seen some money go into gold and we were seeing some start to come into silver. I think this will probably accelerate if things get hairy, for example, going into the election season or if simply we start seeing some of the other assets reprice. In my opinion, stock market is wildly overpriced even after the recent correction and bonds are cheap and gold is cheap. So I think that once reality hits in some of these other fundamental stories, we might see some money shift into gold as a bit of a hedge against uncertainty.
