There are two main factors that drive gold prices, the strategist said.
In the short-term, gold has an inverse relationship with the U.S. dollar and is driven by noncommercial and speculative trading in the futures market. The second driver is deeper and structural as investors view gold as an alternative currency and insurance against debasement of the purchasing power of the dollar and euro in particular.
“Many institutional investors are buying gold as insurance against worst-case global scenarios,” Brooks said. “They’re concerned about the U.S. debt problem and extremely accommodative monetary policies by the Federal Reserve and other central banks. They view gold as one of the few ways to hedge the risk of currency debasement and inflation.”
ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)
