By Jeff Benjamin
High demand, stock market valuations, stingy bond yields and unorthodox monetary policy may be stoking the rally, which seems to have legs
There are seemingly endless theories to explain the stunning gold-price rally this year, and most of them support more of the same for the precious metal.
Global gold demand reached 2,336 tons through the first six months of the year, led by investment demand — representing a record 1,064 tons — according to the World Gold Council.
That growing demand has driven the price of gold up 27% this year, marking the best first-half performance since 1980.
Juan Carlos Artigas, director of investment research at the World Gold Council, said unlike 1980, when the price spike was related to macroeconomic uncertainty, this year's rally is fueled from multiple directions.
“There is still the issue of macroeconomic uncertainty, but we are also dealing with a U.S. dollar that is less strong than it has been recently,” he said.
Considering that gold has come off a couple rough years while recovering from the 2011 lows, Mr. Artigas said there was some pent-up demand from investors who had been waiting for an entry point.
“Investors reduced gold positions over the past three years and were looking for a reason to get back in to use gold again to hedge portfolio risk and preserve capital,” he said.