“If we are going to enter another period of massive
economic slowdown, one would have to expect risk assets and the
S&P to underperform gold as well,” said Adam Sarhan, CEO of
Sarhan Capital, a consultant to institutional investors.
The anticipation of dire economic events, such as the
Standard & Poor’s downgrade on U.S. Treasury debt last Friday,
default by a euro zone country or problems in the European
banking sector, prompted investors to favor gold at the expense
of riskier assets.
“Right now, with the dollar and euro in trouble — people
are talking about the euro failing. If you have a ‘black swan’
type event with a major currency, people are going to flock
toward gold,” said Sarhan, using a term for a low-probability
economic shock that catches markets unprepared.