A 'new rally' could be afoot in gold: Strategist

Gold broke decisively above $1,300 Thursday morning to hit the highest level since August 2014, but can the yellow metal keep going higher?

Boris Schlossberg, managing director of FX Strategy for BK Asset Management, thinks so, especially in today's low-yield environment.

"If we can break above $1,300, we could have a new rally in gold, because the market is going to essentially assume that the Fed will stay stationary until December," he said Wednesday on CNBC's "Trading Nation." "Investors are looking anywhere to park their funds where there is yield."

While gold itself doesn't produce yield, the metal has historically been what Schlossberg calls a "risk-haven repository" as investors scramble for security in uncertain, low-yield markets. Bond yields currently hover near record lows and dipped even lower after Wednesday's Fed announcement, leading gold to rally and inch toward $1,300 during intraday trading. On Thursday, it was trading at $1,307.

Low rates generally help gold because they make the metal's lack of yield look better in comparison, and they tend to be correlated to a falling U.S. dollar.

Additionally, Schlossberg says that if Britons vote to leave the European Union in next Thursday's referendum, global markets could be thrown into chaos and investors could flock to gold, especially if the dollar were to fall as it did post-Fed Wednesday.

But Eddy Elfenbein, editor of the Crossing Wall Street blog, believes investors are much better off going for equities instead of gold.

"We know that the Fed has a bias towards tightening and could take that away at any time," he said. "Plus, if you look at the alternatives in the equity markets, the S&P 500 is giving you 6 basis points more than the 10-year, and gold which doesn't yield anything."

"There are so many better alternatives in the equity market right now," Elfenbein said.


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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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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