New York, Nov. 10: Think of it as the Tea Party of investments. The price of gold has been rising as anxious investors cast what amounts to a throw-the-bums-out vote against, well, just about everything.
The weak dollar, the volatile stock market, the lacklustre economy, the yawning budget deficit, the accommodative Federal Reserve — all this and more have people rushing for gold.
The metal touched a high of $1,424 an ounce on Tuesday, although the price remains well below the peak of the early 1980s once inflation is taken into account.
“It’s in effect a protest vote that there’s something amiss with current policies,” said Mr Abhay Deshpande, a portfolio manager with First Eagle Funds and a long-time gold investor.
“People are almost acting as their own central banks because the advantage of gold is that it acts as a hiding place in times of currency turmoil,” Mr. Deshpande said. A steady drumbeat of higher price targets from Wall Street firms — as well as recent pronouncements from political leaders — has buttressed what was already strong investor demand.
Just as the Tea Party has moved from the political fringes to prominence in Washington, so gold has become a touchstone for policy makers and investors alike. On Monday, the president of the World Bank, Mr Zoellick, surprised experts when he suggested the price of gold should be considered a financial yardstick, reversing 40 years of relying on paper currencies.
Deemed intrinsically valuable for thousands of years, gold has traditionally been a hedge against rising inflation and political or economic uncertainty. Over the last two months, the dollar has declined 6 per cent against its principal peers, but gold has jumped 17 per cent.