As “fear trade” is dwindling down and the old-guard investors are stepping back, the new generation is buying gold to “make money” rather than to hedge against risk, said one precious metals expert.
“We advise investors to buy gold and silver out of a combination of greed and fear,” the managing director of CPM Group Jeff Christian told the Korelin Economics Report on Monday. “But, the fear factor is relatively low in our view. And the real thing is — let’s make money here.”
Christian doesn’t deny the existence of “fear trade,” stating that people still purchase gold and silver as an insurance policy.
But, the new trend that CPM Group described is investors “coming in and saying that they want to figure out how to make money [by buying gold],” Christian noted. “We are seeing a combination of factors driving these guys that we haven’t necessarily seen with investors in the past.”
This is a good change for gold, according to him, since the older type of investors are exiting the playing field.
“[There is] a lot of long-term gold bulls, who have either given up or died, and their heirs are going back to their brokers and saying: ‘Give me the money [back]’.”
The disappearance of the old guard is reflected in lower U.S. Mint’s coin sales of gold and silver American Eagles, said Christian. But, this is countered with increasing investments into ETFs, futures and options.
The new investors are “more opportunistic,” described Christian, adding that “a new gold renaissance” is on a way. “Our view has been that a secular upward shift in investment interest in gold is going to continue for many years to come,” Christian said.
One of the main drivers behind this positive shift for gold is the rallying stock market, which has been controlled by the bulls since 2010, according to the precious metals expert. “Smart money sees that and says that the stock market rally has to end and it will probably end badly,” he said.