Barron's Sees Gold Staging a Comeback in the Near-Term

Despite lack of enthusiasm from large speculators, gold remains as popular as ever.

In a recent article on Barron's, columnist Andrew Bary outlined why gold could be staging a comeback in the near-term. Newsmax reported on the article and wrote that, despite the lack of enthusiasm from large speculators, gold remains as popular as ever among cautious investors and those looking to shield themselves against the dollar's depreciation.

Although it isn't making the headlines, Bary notes that global inflation is something every investor should prepare for. As GoodHaven portfolio manager Keith Trauner explains, governments around the world are dealing with an immense amount of sovereign debt. According to the Newsmax article, policy makers will always see inflation as preferable to defaults or restructuring, which is why a steady uptick in prices will continue to be the norm. Few assets can boast of having retained their value against the dollar over the past century, which makes gold the ideal hedge against a guarantee of high inflation.

Potential losses in the dollar are another source of relief for the yellow metal reports the article. Those who feel that the greenback is propped up and overbought rely on gold's strong negative correlation with it to guard against a potential pullback.

According to the article, the general consensus is that higher interest rates will continue pushing down on gold, with the federal-funds rate expected to rise by 1% between now and late-2019. Yet many forget that the inflationary 1970s, which hosted a record number of rate hikes, still rank among gold's best decades, showing that the metal can thrive in an environment of higher rates.

Gold's unyielding scarcity likewise speaks in favor of a recovery. The roughly six billion ounces of gold available today, worth at least $7 trillion, are minimally replenished year-on-year, as the total annual mining output amounts to less than 2% of the global supply. Mining efforts have been complicated by the cost-cutting closures of many mines over the past decade and a dearth of new exploration, giving weight to warnings that the supply of gold is rapidly dwindling, writes Newsmax.

Large investors with a keen eye for precious metals aren't waiting for gold prices to surge, as evidenced by John Paulson's recently-formed coalition whose goal is to breathe new life into the gold industry. Besides the billionaire fund manager himself, other prominent members of the 16-member group, called Shareholders' Gold Council, include fellow money manager John Hathaway and Egyptian billionaire Naguib Sawiris. Sawiris, who makes the list with his La Mancha Group, said in April that he invested half of his $5.7 billion net worth into gold.

Paulson's decision to unite institutional gold investors comes as large funds continue to shun gold in a gesture that many interpret as a sign of higher prices to come.