Recent developments in the foreign exchange market have intensified the currency war that began more than a year ago. And that's good news for gold many experts say.
"There's competitive currency devaluation occurring," Michael Tiedemann, who oversees $9.5 billion as chief investment officer of Tiedemann Wealth Management, told
The Wall Street Journal. "Gold is your natural hedge against that."
The euro dropped to an 11-year low following the European Central Bank's announcement Thursday of a 1.1 trillion euro quantitative easing program. The Swiss National Bank's decision earlier this month to drop its ceiling for the franc has also depressed the euro.
Giovanni Staunovo, a commodities analyst at UBS Wealth Management, believes that once the Federal Reserve begins raising interest rates, "we'll have a stronger dollar and weaker gold prices."
Some experts say the currency war has entered a more dangerous phase following the ECB move. "So far it is a war, but it's being played like a chess match," Cashin, UBS' director of floor operations at the New York Stock Exchange, told
CNBC.
"That laid-back cerebral attitude is going to disappear. At some point somebody is going to get their currency to a place where it's going to cause enough pain to somebody else, and then it's going to turn into a real war. . . . This currency war cannot go well. They never have."
Gold has risen 9 percent so far this year amid the plunge of oil prices to 5 ½-year lows and increased volatility in the stock market as well as the currency turmoil.
The precious metal traded at $1,293.20 an ounce Friday, after hitting a five-month high earlier in the week.
"There's a sense that the world is a riskier place than it was, and gold might be one of those assets you want to hold just in case things go badly," Bart Melek, head of commodity strategy at TD Securities, told The Journal.
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