Here are the 3 things that will drive gold higher
- Exante Data founder Jens Nordvig says the low-yield environment, trend of the dollar, and strong growth in emerging markets are behind the rally.
- Tensions in Washington, including the risk of a government shutdown and failure to lift the debt ceiling, could drive another rally.
Gold has surged more than 12 percent this year, and Exante Data founder Jens Nordvig says there are three main macroeconomic trends that are behind the rally.
"I would say it's the low-yield environment, the trend of the dollar and strong growth in emerging markets [that are driving gold]," he said Thursday on CNBC's "Futures Now."
"Those three things together are some of the things that have underpinned the gold rally, and they're still here."
Low bond yields generally lessen the opportunity cost of holding gold, as gold yields nothing and therefore investors are less tempted to pour into bonds than they are into the yellow metal. With U.S. Treasury yields near June lows, the drop in bond yields has partly accounted for gold's recently rally that began in early July.
Of course, gold's advance has also been due in part to the decline in the dollar. The yellow metal and greenback have an inverse relationship, and while gold has rallied, the dollar has dropped about 9 percent from the start of the year. What's more, Nordvig also believes the "dollar retracement" this year might still continue. And so while it's "just uncertain right now to take a long dollar position," gold may be where investors want to look if the greenback continues to fall.
Aside from those three economic factors, Nordvig mentions that tensions in Washington could also contribute to another rally for gold.
"There's the government shutdown risk and then there's the debt ceiling risk," he said. "There's been an elevated risk since Trump started to talk about it in more casual terms at his speech earlier this week."
"That's definitely something that's holding the market back, and it's something that could potentially give a boost to gold while dragging the dollar down," Nordvig added.
Gold did climb above $1,300 on Friday, hitting a one-week high before dropping back below that key technical level.