Gold Prices Reach All-Time High — Should You Invest Now?
Gold prices exceeded $2,135 per ounce mid-day on Monday, Dec. 4, in part due to the market response from Federal Reserve Chair Jerome Powell’s comments regarding moving “carefully” with further interest rate hikes.
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The price of gold is at an all-time high, gaining 3% in early trading before paring gains, Bloomberg reported. Gold has risen more than 600% since 2000, although, when adjusted for inflation it still sits below its January 1980 high. Adjusted for today’s dollars, gold exceeded $3,000 at that point.
Interpreting Powell’s speech that the Fed might pivot toward rate cuts, the value of the dollar dropped further, along with Treasury yields. Savvy investors sought stability in gold.
Jo Harmendjian, portfolio manager at Tiberius Group AG, told Bloomberg that gold, “is the answer for many things at the moment — whether it’s inflation carrying on, rate cuts or the uncertainty with very costly wars going on.”
However, after the surge early Monday, gold dropped back to $2,062. Kelvin Wong, senior market analyst at Oanda Asia Pacificce Pte Ltd. told Bloomberg that the rise could have been “driven by stop-loss orders.”
The Relationship Between Gold and Interest Rate Hikes
Typically, gold prices rise when interest rates drop, since gold pays no interest. But Powell’s comments did not indicate impending rate cuts. Rather, in his speech last week, he pointed out that the U.S. has not yet felt the full effects of the 5.25% rate hikes of the past two years.
“Having come so far so quickly, the (Federal Open Market Committee) is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced,” he said at an event at Spelman College in Atlanta, reported by Reuters. He also reiterated during the speech that the fight against inflation may not be over.
“We are prepared to tighten policy further if it becomes appropriate to do so,” Powell said at the meeting.
However, chief market economist at Spartan Capital Securities told Reuters, “[Powell] used the word ‘balanced,’ and the message he’s sending is the Fed is not going to change its rhetoric, but things are going the way they want them to go and they’re not going to raise rates again … They’re done, they’re finished, and that’s what the market thinks.”
Should You Invest In Gold?
If this is true, and interest rates may begin falling in the new year, there’s still time to get in on a 2023 gold rush. In fact, experts at CBSNews.com warned not to wait until 2024 to invest in gold. Although the price jumped with investor optimism this month, the precious metal still has room for growth.
Gold is a solid hedge against inflation, as well as market volatility. If the Fed does cut interest rates, or even slow rate hikes, moving into 2024, you’ll want to buy gold now before its price climbs higher. There is still time to dollar-cost-average your investment, which means you’ll want to buy small amounts incrementally at certain times.
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How to Invest in Gold
You can invest in gold in many ways:
Bullion
Coins
Jewelry
ETFs
Gold-mining stocks
Each has advantages and disadvantages. For instance, if you buy coins or jewelry, you’ll be paying a premium because of the type of investment. Meanwhile, bullion, often in the form of gold bars, can be more difficult to store, depending on the quantity you buy.
Stocks and ETFs are easy, liquid investments that require no storage. But when you invest in gold in these forms, you’re investing in companies, which means their price and return on investment are tied to more than just the price of gold. Factors such as the company’s management and even the stock market can affect the prices of gold stocks and ETFs.
” Only gold is worth gold,” Jonathan Rose, CEO of Genesis Gold Group, previously told GOBankingRates. “People like the fact that having something tangible gives them peace of mind.”
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This article originally appeared on GOBankingRates.com: Gold Prices Reach All-Time High — Should You Invest Now?
