Reasons to Invest in Gold Before the Upcoming June Fed Meeting
The Federal Reserve is set to meet next week, and the decisions made during this meeting could significantly influence various financial market aspects, from interest rates on credit cards and loans to returns on deposit accounts and bonds.
The outcome of the Fed meeting can also affect the price of gold. Gold is often viewed as a safe-haven asset, and factors impacting financial markets can also influence gold’s price. If you’re considering investing in gold, it might be wise to act before the Fed meets. Here’s why.
Why You Should Invest in Gold Before the June Fed Meeting
Here are three compelling reasons to buy gold before next week’s Fed meeting:
Rates Could Rise, Increasing Gold Prices
One key topic at the Fed meeting will be the federal funds rate, which serves as the benchmark for consumer interest rates. The Fed adjusts this rate to keep inflation around its 2% target. If inflation is low, the Fed may lower the rate to encourage spending and price growth. Conversely, if inflation is high, the Fed may raise the rate to curb spending and minimize price growth.
Changes in the benchmark rate can influence gold prices. Rate hikes often lead to higher gold demand, driving up the price. Given that inflation has exceeded the Fed’s 2% target over the past couple of years, the federal funds rate is at a 23-year high. Although recent reports show cooling inflation, April’s rate was still 3.4%, well above the Fed’s target. Thus, a rate hike is a possible outcome of the upcoming Fed meeting.
If the Fed raises its rate or if there’s anticipation of a hike, gold prices could increase due to heightened demand. Therefore, it might be prudent to invest in gold before the June meeting.
Gold Prices Are Down from Recent Highs
As of June 7, 2024, the spot price of gold is $2,347.39 per ounce, down about 4% from its recent record high of $2,439.98.
Gold prices may rise again soon, influenced not only by the upcoming Fed meeting but also by ongoing concerns like inflation and geopolitical tensions. Investing in gold now, while prices are lower than a few weeks ago, could allow you to benefit from potential future gains.
Gold as an Inflation Hedge and Diversification Tool
Gold is a popular inflation hedge and diversification tool. Historically, gold prices have increased alongside goods and services prices during high inflation periods. Thus, adding gold to your portfolio could help offset inflation-related losses from other assets.
Moreover, gold typically doesn’t move in tandem with stocks, bonds, and other traditional assets, potentially improving your portfolio’s risk-adjusted returns. With potential changes in monetary policy imminent, now might be an opportune time to include gold in your portfolio.
The Bottom Line Next week’s Fed meeting could push gold prices higher. Since gold is currently priced below its recent record high, buying now might offer a relative discount. Additionally, gold can protect your portfolio by acting as an inflation hedge and diversification tool. Consider your gold investment options before the Fed meets next week.
