Markets

Forget Gold? There Are Better Ways to Play Precious Metals, According to One CIO

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  • Gold is being watched closely amid widespread markets expectations of an economic rebound and rise in interest rates, which don't bode well for the metal.
  • Chris Wyllie, CIO at Connor Broadley Wealth Management, told CNBC why he prefers silver.
  • Over the last year, gold has risen 4%, while silver is up over 70%.

There's an "interesting story" around gold right now, according to one investor, who said there were better ways to play precious metals right now.

Gold is being watched closely amid widespread markets expectations of an economic rebound and rise in interest rates, which don't bode well for the metal. Chris Wyllie, chief investment officer at Connor Broadley Wealth Management, said his team was looking elsewhere for returns.

"We're not calling time on gold, we just think that while those (interest rate) dynamics are fighting their way through, we see better ways to play precious metals," Wyllie told CNBC on Thursday.

"And we prefer silver at the moment, which has got industrial applications as well. So with a very buoyant global economy, that's another string to its bow."

The price of gold has fallen dramatically since it hit a high of $2,043 an ounce last August.

Since then, it has experienced volatility, with the price rising amid pessimism over new waves of Covid cases and falling on optimism over vaccines and the reopening of the global economy. Gold is considered a safe-haven investment, meaning it tends to lose its appeal in times of economic strength.

On Thursday morning, spot gold was trading at $1,777.2 per ounce, while silver was trading at $26.26 per ounce. Over the last 12 months, gold has risen around 4%, while silver is up around 70%.

An 'interesting story'

Wyllie characterized the current market trends affecting gold as "an interesting story."

"So much of the gold story seems to be falling into place; these arguments that it's the ultimate store of value, that you can't manipulate it in the way you can fiat currencies with money printing going on etc — all of that points in the direction of gold doing well and yet, it's actually started to lose some momentum," he said.

"Its highs were actually quite a while ago now, last summer, so it does seem like the dynamics are changing and I think the answer really comes down to the interest rate complex," he said, referring to market expectations that rates will rise amid an economic recovery following the pandemic.

"I think it's this potential for a push higher in long-term interest rates, and real interest rates in particular, which is worrying gold."

Higher interest rates make gold less attractive to investors as gold is a nonyielding asset. Because it does not pay interest, investors may be more likely to seek returns elsewhere, such as from stocks and bonds.

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