It wasn't so long ago that some of the more famous investor gurus were shrugging off gold as nothing more than shiny trinkets with no investment value. They were wrong. This safe haven is back, the recovery is clear, and there have been some very big changes of heart.
The biggest gold producers in the world have seen their share prices double this year. Not only are gold prices soaring, but producers are cutting costs and slimming down debt as they pave the way for gold to return to the top of the favored commodities list.
Even though gold dropped earlier in May, Thompson Reuters noted that shares outstanding for two major ETFs tracking gold rose 11 percent, and precious metals ETFs enjoyed four straight weeks of inflows in May. A ton of money is moving around here.
And thanks to an overvalued U.S. dollar, gold may have nowhere to go but up.
Gold has no upper limit on its price, and according to Harvard economist Kenneth Rogoff, speaking to the Financial Times recently, emerging economies might do well to shift all their U.S. dollar reserves to gold. Gold, he says, could be viewed as “an extremely low-risk asset” with average real returns comparable to very short-term debt.
Russia, it seems, would agree. Moscow hates the U.S. dollar and craves gold, tripling its gold holdings between 2005 and 2015.
Weak prices, stock market vulnerabilities, and a weakening currency in 2015 also led Chinese investors to buy almost 1,000 metric tons of gold as a safe haven asset.
Major Money, Massive Returns
Billionaires have certainly taken notice. They are dumping massive amounts of money into gold right now and seeing huge returns. They are now ahead of a game that has seen prices rise almost 14 percent this year—even with the recent correction.
Take George Soros, for instance, who recently invested $475 million into Barrick Gold, which has since doubled in value.
Well-known Canadian mining philanthropist-investor Frank Giustra also appears to be excited about the recovery of gold, buying close to 13 percent of a high-potential junior miner, Sandspring Resources, which is advancing a major gold prospect in Guyana.
Marc Faber, the author of the Gloom, Boom and Doom report—known to offer dreary outlooks on stocks and investments—told CNBC last week that he believes gold, oil and gas shares have “significant upside potential in 2016” as investors hope to use them as long-term stores of value.
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