Should you buy gold before the next Fed rate hike?

Following a year-plus of regular rate hikes, the Federal Reserve paused rates in June and the latest inflation numbers showed inflation starting to cool — all signs the economy may be on the mend. But with pointers Another rate hike After the Fed’s July 25-26 meeting, we clearly have a long way to go.

Through the economic turmoil of the last few years, the gold still have A popular resource For investors looking for stability and protection from market conditions. But is it still worth buying with the impending rate hike on the horizon?

Learn more about gold investing here to find out if it’s right for you!

Should you buy gold before the next federal rate hike?

To answer this question, it is important to understand the influencing factors gold priceAs well as how important value is to your investment decision.

How Federal Interest Rates Affect Gold Prices

When the Fed raises interest rates, savings interest rates also rise. This means it becomes more attractive for consumers to keep their money in interest-earning deposit vehicles. High Yield Savings Account And CD. Gold is not popular as an investment option, and as a result, its price usually goes down.

That said, it’s not a hard and fast rule. Over 15 months of rate hikes, gold prices have risen steadily, taking a hit Record high in April. They can hold around the $2,000 mark, and Experts predict They could stay – if not go further – next month.

Because, when inflation plays a role in the price of gold, it does Many other reasons. It is the interplay between these factors that ultimately determines the price of gold.

Other Factors That Affect Gold Prices

In addition to the federal interest rate, the price of gold is affected by:

• Inflation: The Fed raises interest rates to fight inflation, so a noticeable inflation is going to be a problem in the coming hike. Gold has always been a consideration Hedge against inflation As the value of the dollar declines, its value has historically increased. When inflation is high, investors often flock to gold safe haven To preserve their wealth.
• Political Uncertainty: Tensions between countries, trade wars and other geopolitical events can affect gold prices. Investors who fear the impact of this uncertainty are turning to the stock market and other traditional investments alternative resources Like gold, prices rose to protect their investment dollars.
• State of the World Economy: Gold’s stability makes it an attractive investment in times of global uncertainty. Central banks around the world hold gold in their reserves to reduce risk, and investors seek it out for the same reason. For example, gold hit an all-time high in August 2020 as the global economy recovered from the effects of Covid.

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Why gold is a smart investment at any time

Gold prices and where they’re going are worth tracking, but they’re not as important to your investment decisions as you might think.

Gold is seen as one of the best Long term investment That protects your portfolio from the risk of more-volatile assets, which can lose value during periods of market volatility. Although gold provides reliable returns, it is not meant to grow your wealth like assets like stocks and bonds.

for this Experts recommend Keep only 5% to 10% of your portfolio in gold. Why is that too? Trying to time the market This is not the right approach to investing in gold.

“While gold prices can rise dramatically during periods of volatility, I don’t recommend trying to time those price movements,” CFP Alex Rezzo, founder of Andante Financial, said recently. CBS News. “First, it is difficult to time your entry and exit from your gold positions profitably, and even professional commodity traders suffer significant losses trying to do so.”

Bottom line

Another rate hike could cause gold prices to fall, but that’s only one of many factors that affect them. Prices then depend on how these factors interact and how they affect overall investor confidence. Instead of trying to predict the future, you’re better off focusing on gold Long term benefits Time to decide to add it to your portfolio.

While there are no guarantees when it comes to investing, gold has proven to be a smart way to strengthen your portfolio and weather market ups and downs over the years. That makes it one Smart investment anytime, rate increase or not. Of course, as with any investment, it’s important to weigh the pros and cons against your personal investment goals and talk to a financial advisor for guidance customized to your situation.