9 months ago • 1 min
Gold staged an impressive 20% rally from its October low of around $1,620 an ounce, to its January high of about $1,960. February, meanwhile, has seen it simmer down a bit: the price has fallen about 5%, to trade pretty much flat for the year. As a result, gold is currently sitting around a nice support level (green strip) – and that could offer up a good entry point for the next potential leg up.
I think the long-term case for owning some gold hasn’t gone away. As I wrote here, it could provide a hedge against the possibility of inflation being higher for longer. See, the Federal Reserve (Fed) is committed to bringing inflation down to its 2% target. But it’s also committed to ensuring maximum employment. And although the US jobs market seems to be holding up right now, there’s still a good chance we haven’t seen the impact of all those rate hikes just yet. If the job market weakens later, and inflation is still stubbornly above 2%, the Fed could be caught between a rock and a hard place – and it might be forced to ease up on rate hikes to protect jobs, while settling for slightly higher inflation (say, 3% or 4%) for a while.
Gold is the world’s oldest inflation hedge. As the legend goes, an ounce of it could buy a senator a toga in ancient Rome. Today, it would buy you a designer suit in London. So if you’re looking to preserve some purchasing power for the long haul, gold has shown itself to be pretty resilient on that front. For ETF exposure to the metal, check out the SPDR Gold Shares (Ticker: GLD; expense ratio: 0.40%). Or, consider owning and storing the physical metal through platforms like BullionVault.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
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