By Aug. 23, 2020 5:30 am ET
The 2020 gold rush in markets is starting to unnerve even some longtime fans of precious metals.
Gold futures are near records and up about 28% for the year, while silver has more than doubled since hitting a multiyear low in March. The moves aren’t entirely surprising, given the scale of the coronavirus-driven economic shock and the countervailing global stimulus led by governments and central banks. Many investors fear economic stagnation, an outbreak of inflation or some combination of the two—a recipe for rising demand for metals viewed as a store of value in trying times.
But with the rush into gold has come an increase in volatility that many traders don’t welcome. Both metals have dropped about 6% or more from peaks hit this month and are recording bigger daily swings than normal, suggesting that gold and silver have joined U.S. tech stocks among the most crowded trades in markets—creating the risk that months of outperformance could vanish in a day or two of frenzied selling should market or economic conditions turn.
Assets under management for five gold-backed ETFs
“Almost everybody is talking about gold.…That is a warning signal in a way,” said Luca Paolini, chief strategist at Pictet Asset Management, which is holding more gold than its market benchmark but may sell some if volatility continues. “At least until the election in the U.S., this volatility will persist.”