When markets are jumpy, investors typically turn to safe havens.

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But there’s one problem: “The world is running out of safe havens,” says Vincent Lépine, vice-president of global economic strategy (asset allocation and currency management) at CIBC Asset Management.

“You used to have the yen, Swiss franc, the U.S. dollar and the euro,” he explains. But now, “The Swiss franc can be ruled out at this point, and even though the yen has behaved like a safe haven recently,” there’s doubt as to whether that trend will continue.

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Further, he says, “The U.S. dollar has already gained a lot of ground and is significantly overvalued. It’s not as obvious what role it will play going forward and that leaves one option, and that’s gold.”

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Lépine correctly predicted gold prices would rise this year. The rise has occurred for two reasons: first, he explains, “Gold prices are determined by the global environment and how much uncertainty there is. And right now, we’re in an environment where [we’re unsure] where the world economy is headed.”

Secondly, “You need to see the upward trend in the U.S. dollar being challenged. A year ago, that was out of the question since the [currency] was quite strong. But at this point, the U.S. dollar has gained so much ground that it’s not as obvious what’s coming next.” In particular, it’s unclear how the U.S. dollar will perform against other global currencies through the remainder of 2016.

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So, says Lépine, “Even though gold prices have already appreciated since the start of the year by about 16%, we still think there’s more upside for the rest of the year. And, you can look at silver the same way, [even though] silver is a bit different in terms of its entry point. The trend in gold will be shared by precious metals in general.”

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