Now Gold is a Safe Haven Asset?

By Dennis Rhee, Managing Partner of Treesdale Partners and Portfolio Manager of the AdvisorShares Gartman Gold/Euro ETF (NYSE Arca: GEUR) and AdvisorShares Gartman Gold/Yen ETF (NYSE Arca: GYEN)

 
What a difference two weeks makes. With extreme market volatility and a potential global meltdown, gold has gotten a safe haven bid again. China’s problems have triggered global equity markets to go into panic mode and assets across the board are being liquidated to raise cash. Stanley Druckenmiller, a famous hedge fund manager, has publicly declared that gold is his largest long position. Gold is up over 7.5% from the August lows.

On the FX front, the flight to quality to U.S. Treasuries has happened as well with 10-year rates below 2% again. Then why is the US dollar being sold off? Perhaps the market is re-pricing the timing of the Fed liftoff. Another plausible reason is the unwinding of carry trades that were originated in Yen and Euro. Whatever the reason is, the long term forecast for the U.S. dollar versus the Yen and the Euro will be determined on macro factors and not short-term capital flows.

With gold reestablishing its importance in portfolios again and with current dollar weakness, gold in yen and euro terms look like they are at attractive levels.