Here's what did it:
The Federal Reserve sent its strongest signal yet that it is preparing to take new steps to bolster the recovery, saying that measures would be needed fairly soon unless economic growth picks up substantially.And the world's biggest bond manager knows exactly what to do about that:
The statement was included in minutes released Wednesday from the Fed's July 31-Aug. 1 policy meeting. The minutes also indicated that a new round of bond buying, known as quantitative easing, was high on its list of options.
"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," according to the minutes, released after the customary three-week lag.
"The Pimco Commodity Real Return Strategy Fund, which has about $20 billion in assets, has increased its gold holdings to 11.5% of total assets recently, from 10.5% two months ago, and has been adding to the position when gold prices dipped toward $1,500 a troy ounce, says Nic Johnson, the fund's co-portfolio manager."Disclosure: long gold, silver, platinum, palladium, GLD, SLV, GSOL, GDX, GDXJ, and the Pimco Commodity Real Return Strategy Fund (PCRRX).
Pimco expects currency devaluation to remain a central theme in the market as global liquidity swells thanks to continued easy-money efforts from the world's central banks. Interest rates, meanwhile, will need to stay low as government debt runs at a high proportion to the overall economy.
"Gold is the currency without a printing press," Mr. Johnson says.
Moreover, investors should purchase gold before inflation rates rise, as "it's the process of going from 2% inflation to 4% inflation that's going to drive gold higher," he says.