Stock valuations are "still persuasive," even though the S&P 500 Index began the week with a record close and the Dow Jones Industrial Average finished Monday just 46 points shy of its all-time close, Jeremy Siegel told CNBC on Tuesday.
The S&P had last closed at an all-time high on April 11, followed by a week of selling and then another march higher. It has been a similar story for the Dow: a record high close of 14,865 on April 11, a dip and then a recovery.
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"I think [the Dow] is going to between 16,000 and 17,000 this year, and be at 17,000 and maybe higher," Siegel, a finance professor at the University of Pennsylvania's Wharton School, said in a "Squawk Box" interview, sticking by a prediction he made in March 2012.
"People are putting their toe in the markets, saying, 'Hey, I can't get [return] from my bank accounts, I can't get it from my bonds, I can't get it from my CDs. Maybe I should finally get into some dividend-paying stocks,' " Siegel said, adding that stocks are still cheap relative to alternatives such as bonds.
The first quarter was the best start fo U.S. stock mutual funds in five years, according to data from Investment Company Institute. Investors have poured in $21 billion so far this year, versus the $16.9 billion they withdrew from stock funds in first-quarter 2012.
Interest in the stock market is growing, but "it's still minuscule," Siegel said. "There's $11 trillion in zero-interest bank accounts, in CDs, money market mutual funds that's going to get tired of staying there."
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"The gold swoon is good for stocks, too," he argued.
U.S. gold futures had dropped to about $1,321 on April 16, the lowest level in more than two years. They've recovered somewhat, but gold is still down about 12 percent on the year.
"People are going to say, 'Is there anything I can be absolutely sure is safe? Hey, I'll buy in to dividend-paying stocks,' " Siegel said.
Investors who bought gold in early 2008, before the financial crisis, and have held it have seen a return of over 70 percent—about seven times more than stocks over the same period.