How can gold prices be affected by other rate hikes?

After a series of 10 rate hikes over the past year driven by the Federal Reserve’s goal of taming inflation, the Fed is set to make its next rate decision later this month.

Mixed signals were received ahead of the meeting. In May, Fed Chair Jerome Powell The committee will decide on future rates “based on the totality of incoming data and their impact on the outlook for economic activity and inflation,” before stressing: “We are ready to do more if the moderation of broader monetary policy is confirmed.”

More recently, comments from Fed governors have signaled a rate hike – if not this month, then in the near future. One said there There is no “compelling” reason Now to pause the rate hike, while another is justified “Skip” on rate hikes this monthbefore potentially raising again in July.

for Gold investors, interest rates set by the Fed can affect not only market movements but the broader economic factors that draw people to (or away from) gold. If the Fed’s recent signals hold and further rate hikes occur this month or later in the year, gold price may be effective.

Thinking about gold today? Learn more about the best way to invest with a free information kit.

How can gold prices be affected by other rate hikes?

There are plenty of reasons for that Contribute to the value of gold. The Fed’s rate decisions are just one of many – but they can affect the price of gold.

Rising interest rates can make other safe, yield-earning investments more attractive — eg High Yield Savings Account, money market funds and even bonds. So some believe that while these others safe haven Become more attractive, gold is not the only safe investment option.

Looking back at more than one year of consecutive rate hikes, Gold prices continue to cool Anticipating or following a rise in interest rates. Last year, gold started to fall after the first rate hike in March, before bottoming out and starting to rise again around November.

However, this is not always the case, thanks to other factors that also affect gold. For example, after a 25 basis point rate hike in March, gold prices (which were already rising) continued to improve and reached near all-time highs by April – perhaps spurred by Recent bank failures. Even after the most recent increase in May, gold prices remained strong due to increased demand Possible loan default.

Ultimately, another rate hike from the Fed could temporarily dampen gold prices. But the breadth of contributing factors can help mitigate those effects, especially for Long term investors.

Find out how you can benefit from a gold investment now with a free Investor Kit

Why now is a good time to consider gold

Regardless of what rate action does to gold prices, now is still one This is a good time to consider As part of your portfolio, for a few reasons.

To begin with, inflation is still elevated. Although the Fed’s moves show progress, inflation remains above its 2% target. Gold is often seen as a Hedge against inflation And can help you conserve purchasing power.

Gold is also a good way diversity Against possible recession. Gold often moves independently of traditional stock prices. Keeping a portion of your portfolio in gold can help you stay afloat if other markets take a hit. Recession period.

Ultimately, gold investors can benefit from focusing on these long-term benefits over short-term price fluctuations. While short-term changes may leave you feeling uncertain, you can benefit over time by creating a long-term plan that you can stick with changing economic cycles.

Bottom line

It is still unclear whether the Fed will decide to halt its rate hikes, raise rates again or raise interest rates later this month after skipping a possible one at the end of the year. Regardless of the decision, gold investors still can Benefits from precious metals. Even if gold prices cool slightly after another rate hike, its appeal as a way to diversify your portfolio and hedge against other markets (as well as inflation) can still be useful for your long-term plans.

Learn how you can get started with gold today with a free investment guide.