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Gold prices, which have already soared to record levels in recent weeks, could get a further boost from a new investor: central banks.
Several central banks are joining average investors in betting that weak currencies—particularly the US dollar—could be a friend to the gold trade for quite some time.
After a weak summer, gold has rallied strongly over the past three months on the belief that that the dollar will continue to fall until the US economic recovery is on more solid footing.
For Rob Lutts, CIO of Cabot Management in Salem, Mass., bull markets such as gold's run in three stages—denial, acceptance and love affair.
The market as he sees it is in the second stage now, so until the love affair commences and the trade gets too frothy, he believes investors can't loose with gold.
"I think we've moved a little more into the acceptance phase," Lutts says. "Eventually asset allocation models like those that come out of big brokerage houses will be increasing their allocation to gold and making it more of a permanent sort of recommendation."
While the weak dollar has been fueling retail investor interest in the metal, it's been only in recent weeks that global central banks—for two decades net sellers of gold—have gotten in on the act as well.
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