Gold has been on a roll this year, up more than 17% and hitting an all-time high. Carley Garner, senior strategist and stockbroker at DeCarley Trading, joined TheStreet to discuss what's behind the recent surge.
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Full transcript of the video below:
CONWAY GITTENS: Could you give us some basic reasons so that people can understand what exactly is driving the rally to record levels?
CARLEY GARNER: If we want to talk about the bigger picture, what was holding back gold growth a couple of years ago was higher interest rates and a higher dollar. And those two things are starting to work. Interest rates are still very high, but I think they seem to be on their way down. And I'm one of those who think that the Federal Reserve will start lowering rates sooner rather than later. And I think that the interest rate market, Treasuries, will follow suit. And if that's the case, it makes gold more attractive. And the reason is that gold doesn't pay dividends. Gold is a portfolio diversifier. It can do well when other assets are in trouble 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 invest their money in instruments that do pay interest, like Treasury bonds, rather than gold. But now, if we see a normalization in interest rates, that will incite a little bit more people to invest a little bit more money in gold, and that should give us a little bit of fun. Also, the higher dollar, the dollar index is trading around 103, 104, which is lower than we've seen in the last couple of years. But the reality is that it's still very, very high. We're probably in for a revaluation of the dollar at some point, I mean, around 90-something. And if that's the case, all things being equal, that will allow gold to go up as well. And we've seen some of this starting, but we haven't seen it fully developed yet.
CONWAY GITTENS: And what role does geopolitics play in this?
CARLEY GARNER: I think that's a really good point. When there's a lot of economic or political uncertainty, a lot of people put their money into safe haven assets. We've seen some money go into gold and some money start to go into silver. I think that's probably going to accelerate if things get tough, for example, heading into election season or if we just start to see some of the other assets come back up. In my view, the stock market is wildly overvalued even after the recent correction and bonds are cheap and gold is cheap. So I think once reality sets in on some of these other fundamental stories, we could see some money move into gold as a kind of hedge against uncertainty.
