Gold (GLD  ) has been one of the best-performing assets in recent weeks. On Friday, it nearly hit $1,700, and it's inching closer to its all-time highs set in 2012. The primary reason behind gold's strength is declining interest rates, slowing inflation, and expectations of more fiscal and monetary stimulus across the globe in response to the coronavirus outbreak. Given these fundamentals, it's likely that gold will make new, all-time highs later this year.

Gold's Margin Call

February 28 was a vicious day of selling in markets, but it did contain some important lessons. The only safe areas were cash and bonds. Everything else got mauled. It didn't matter that interest rates sharply declined which is typically positive for dividend-paying stocks like utilities and consumer staples. Most would think that gold would be a safe haven during such a crisis, but it too was hit. The reason was margin calls. Selling begat more selling, and even safe assets with improving fundamentals were hit.

It's a sign that in a real crisis, gold is not the best hedge and that it's still a financial asset. However, it also showed that such indiscriminate selling can create great entry points for these types of assets. Gold recovered its losses within two days and now has exceeded these levels.

Similarities to 2008

The same thing happened in October 2008 during the nadir of the credit crisis. By all logic, gold was the best asset to own as political fears intensified, interest rates plunged, and there was considerable fear about the future. However, gold fell from $1,000 to under $700. However, this also proved to be an optimal entry point as gold climbed 250% over the next four years with juicier gains for silver (SLV  ) and gold miners (GDX  ).

In retrospect, it's obvious that the U.S. Federal Reserve cutting rates to zero and implementing quantitative easing, in addition to the federal government's efforts to bail out the banks would be bullish for gold. Given the lost output during the recession, easy monetary policy would remain for a long period of time.

Gold Miners and Silver

One glaring divergence in the precious metals market is gold nearing its previous highs, while silver and gold miners remain well below their past highs. If gold continues higher at some point, speculative fervor will erupt, and these laggards will see huge upside. Both of these have consolidated recent gains and been trading in a tight range over the past couple of months.