Gold enthusiasts, who love the shiny metal as much for political reasons–like their distrust of fiat money–as they do for its investment potential, have been searching for a story for why it will reach the lofty heights of 2011 once again.
"The likelihood of higher interest rates in the U.S. has been a concern for investors in gold, which doesn’t pay interest or dividends and costs money to hold. But gold buyers say those worries are receding as U.S. economic growth continues to disappoint. This has led investors to shift their expectations away from rapidly tighter U.S. monetary policy toward only modest rate increases. Gold should remain competitive with interest-bearing assets in this environment, and could rally if inflation pressures resurface, these traders say."
Keep a small portion of gold in your portfolio to diversify and to hedge against the worst. But one quarter of contracting GDP is no reason to think gold is heading for the stratosphere.
