×

I’ve never liked gold—but I do now: Trader

Gold is gaining the favor of some long-time skeptics.

The precious metal has outperformed other major asset classes this year, rising 12 percent in 2016. Gold has become increasingly useful to investors as stocks around the world have fallen, said options trader Dennis Davitt of Harvest Volatility Advisors.

"If you're worried about your equity portfolio going lower, you buy gold as a hedge. If you did that January 1st this year, it's worked wonderfully," he said Tuesday on CNBC's "Power Lunch."

The commodity is looking even more attractive in the face of negative interest rates, Davitt said, especially as Treasury yields tumble. On Tuesday, the Japanese 10-year bond yield fell into negative territory for the first time ever.

Read MoreFrom ZIRP to NIRP: What's the Fed's next move?

Under ultra-low or negative interest rates, holding cash in a bank should cost investors more money, Davitt noted. Despite the fact that gold also costs money to store, Davitt said it should still make a better investment than cash in these circumstances.

"One of the assets that I never liked for my whole trading career was gold," Davitt said in a CNBC "Trading Nation" segment. "But now ... if you have to pay money to store your assets somewhere, I'd rather store a hard asset like gold than something like paper currency."

The surge in gold has also boosted gold mining stocks, with the gold miners ETF (GDX) gaining more than 22 percent year to date. But between stocks and physical gold, Max Wolff of Manhattan Venture Partners said the precious metal should make a better buy.

"The miners are pretty far out from where they should be now, are a little ahead of their skis and are more expensive than gold. We like the metal more than the miners, but think they're both headed up," Wolff said Tuesday on "Power Lunch."

Want to be a part of the Trading Nation? If you'd like to call into our live Wednesday show, email your name, number, and a question to TradingNation@cnbc.com

Videos

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect