Big Investors Have a Gold Gleam in Their Eyes

A lot of big-time investors are turning bullish on gold.

Last month, Stanley Druckenmiller publicly advised investors to sell US stocks and buy gold. Legendary hedge fund manager Paul Singer said “it makes sense to own gold.” Even George Soros has jumped on the gold bandwagon, recently selling stocks and buying gold. Other mainstream investors and analysts have also gotten that gold gleam in their eyes.

What is driving this newfound gold bullishness? It really comes down to one simple word.

Fear.

With all of the economic uncertainty, negative interest rates, and general instability in the world, people are once again turning to the historical safe-haven – gold.

As just one example, the potential exit of Great Britain from the European Union has sparked a surge in gold demand in England.

Chief commodities analyst at HSBC Jim Steel put it this way in an interview with CNBC:

As far as the geopolitical element, it’s certainly not a chicken little atmosphere…I think there’s enough uncertainty facing the global economy and even some geopolitical tensions to keep buying the gold market.”

Dennis Gartman, publisher of the Gartman letter, is bullish on the yellow metal. He chronicled some of the geopolitical reasons investors should consider buying gold:

I think that you’ve got ‘Brexit’ coming at you. You have a Spanish election coming at you in a week and a half and that is terribly confusing. It looks like the left is going to win. You have rising nationalism in France. You have the strike in France. You have one thing after another.”

Gartman also mentioned rising tensions with China in the South China Sea and militant action in Nigeria threatening oil production there.

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Then you have the proliferation of negative interest rates around the world. In fact, Steel argues this is one of the biggest drivers of gold demand:

I think the key element more than any one geopolitical issue, even as much as the Fed holding off a spate of rate rises, is some economies moving into negative rates. That has been very good for gold. When you look at when the gold rally began it is very close to the issue of bonds with a negative yield. If you look at all the economies that have a negative yield, they add up to a little over 27% of the world’s GDP. … Negative yields are a powerful cocktail for gold. They eliminate the opportunity cost of owning gold.”

Interest rates don’t show any sign of rising any time soon. SchiffGold Precious Metals Specialist Addison Quale recently pointed out that interest rates have been trending downward for years. He calls the precipitous decline pathological:

Now that our monetary system is completely disconnected from real money – i.e. gold – interest rates are totally unmoored and out of control. The next stop is oblivion (i.e. negative rate territory across the board) and the beginning of the implosion of our financial system.”

Clearly, now is the time to consider the historic  safe-haven role of gold. A lot of the big-boys certainly are.

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