Gold is now in a bull market. The yellow metal has soared 20% so far this year.
It’s a stunning rally — all the more so because gold has continued to do well even as oil prices and the stock market have stabilized in recent weeks.
At the beginning of the year, it was easy to understand why gold was glittering. Investors were extremely nervous about China and the global economy. Those were big reasons why oil and stocks fell.
Gold benefited since it’s universally regarded as a safe haven fear trade in times of turmoil. It’s a hard, tangible asset and not pieces of paper like currencies, stocks and bonds.
But investors no longer seem to be paralyzed by fear.
Related: Investors are afraid … of missing the market rebound
Oil prices have soared more than 40% since crude bottomed (for good?) just above $26 a barrel on February 11. The SP 500 is up more than 10% in the same time frame. Heck, CNNMoney’s Fear Greed Index is not far from Extreme Greed territory.
Yet gold has gained another 6% since February 11 as well.
So why hasn’t the gold rush ended?
It could be that concerns about negative interest rates in Japan and Europe are helping to push the metal higher. Gold is an alternative form of currency. Rates below zero could make the euro and yen weaker and increase the allure of gold.
Better economic data from the United States may have some investors betting on rising interest rates and higher inflation as well.
That’s a big turnaround from what the market was thinking just a few weeks ago. Many investors felt that the market volatility could prevent the Federal Reserve from raising rates completely this year.
But now that oil and stocks have stopped plunging, investors are pricing in a 39% chance of a rate hike at the Fed’s meeting in June and a 53% chance of an increase in September according to futures trading on the Chicago Mercantile Exchange.
That would be good for gold. It tends to do well when rates are going up since it’s a hedge against inflation.
However, there might be two simpler explanations for gold’s resurgence.
Gold may still be a bargain after suffering for years in a brutal market. And demand appears to be outstripping supply.
The metal hit an all-time high (not adjusted for inflation) just north of $1,920 an ounce in September 2011.
That was shortly after Standard Poor’s downgraded the credit rating of the United States thanks to the debt ceiling debacle in the Keystone Kongress. Stocks were tanking back then much like they were earlier this year.
But even with gold’s rally this year, it is still trading at only about $1,270 an ounce — nearly 35% below its peak. So gold might have more room to run.
“After a long and painful bear market, gold should get a bounce,” wrote Nicholas Colas, chief market strategist at Convergex, in a report Monday. “If we do see more volatility in 2016 — and that is our base case scenario — then gold should prove resilient.”
Related: Economists warn of risks from negative interest rates
Colas added that investors shouldn’t ignore Economics 101 either. Gold is different than no other commodity. Its price should go up if there is more demand than supply. And in that respect, gold is almost the opposite of oil. There is no huge glut.
According to figures from the World Gold Council, the growth in gold output mines was sluggish last year. That could lead to a drop in gold production this year.
But at the same time, there is strong demand for gold from investors in bullion coins as well as exchange-traded funds like the popular SPDR Gold Shares ETF (. )
Fund flow tracker EPR Global said late last week that gold funds have now attracted the biggest share of new investments for any sector fund for three weeks in a row.
Related: China is on a massive gold buying spree
And demand for gold remains healthy in emerging markets like China and India as well.
Sure, gold is not for every investor. And most experts agree that even if you don’t want to own it, you should probably only make it a small percentage of your portfolio.
But Colas thinks it’s time to stop bashing gold as many prominent investors do. Warren Buffett is one of them. The big knock against gold, the bears claim, is that there is no easy way to value it.
Colas argues that gold is no different from most other assets though.
“Look at gold as just another commodity, like oil or corn or sugar,” Colas wrote. “Price is where supply meets demand. No harsh value judgments about why the demand is there. It exists (and has since before humans knew how to write or use the wheel.)”