Gold is having a moment the buying price Of gold Futures has hit multiple record Highs this year since January 2nd it's Risen more than 14% in value that's more Than the Dow Jones NASDAQ and S&P 500 Which have also hit record highs gold Has historically been viewed as a safe Investment because for centuries people Have treated it with intrinsic worth Less influenced by the passions of the Moment the last times it peaked were Following the 2007 the 2009 financial Crisis and after the onset of covid-19 But gold's current rally is happening Without a recession or a pandemic and Inflation and interest rates are both Expected to fall so what is behind the Gold rally here to explain is Campbell Harvey he's a professor of Finance at Duke University and co-author with Claude herb of the golden dilemma thank You so much for being with us who's Buying the Gold so it's very interesting uh you Would think that retail investors are Piling into gold and the usual way that You would invest in gold is to buy uh an ETF but that's not really the case if You look over the last 10 months uh There've been like negative flows or Outflows from the gold ETFs uh and Actually an increase in uh the Bitcoin Uh ETFs so this is in my opinion mainly Institutional investors like hedge funds
U that are speculating on the price of Gold as you mentioned uh gold has done Well over the last quarter but over the Last year it's lagged the SNP and Spectacular Investments like Nvidia and Uh and and others so I do think that uh People saw gold as lagging and the Institutional investors are piling in Now Professor can you help us uh Remember or maybe even learn it for the First time what an ETF is Yeah so an ETF like to buy gold um is is Complicated so yes you can go to a store Like Costco and buy like a small gold Bar but it's a you know an issue in Terms of uh the security of that gold so To actually hold gold at your house is Uh is risky and as costly to Warehouse It in general so instead what people Generally do is to buy uh an exchange Traded fund which is like a cheap Version of a mutual fund and you buy a Share of that and the fund actually Warehouses the gold for you ah okay so It's a note saying somewhere off you've Got some bar of gold that's got your Name on it or a sliver of that bar of Gold is the um what about that Relationship that we mentioned in the Introduction between gold old and kind Of shaky times um is that still the way People think about gold and how then Does that match up with what you were Saying about the purchases being done
Here by hedge Funds so the traditional rationale uh For gold is that it provides like a Crisis hedge or an inflation hedge but My research with Claud herb uh that uses Like thousands of years of data for gold Um provides cter point and and that is That gold is is pretty volatile so uh it Its movements up and down can be very Sharp indeed as sharp as the S&P 500 Which means that it's somewhat Unreliable in terms of that ability and Yes it is true that just before or During the um the covid crisis and and The global financial crisis we saw some Movement up in the price of gold but Then it dropped sharply So so it is unreliable and I do think That this is more institutional Investors um playing what we call a a Momentum trade and that means as the Price is going up you buy more and when That happens uh you get this momentum Until it stops and it turns around so uh Like I know gold is at an all-time high And my research also looks at well what If we buy gold At alltime highs and look at that Historically and historically if you buy At the all-time highs the expected Returns over the next 10 years are quite Uh modest Professor Campbell Harvey from Duke University thank you so much thank You
