The Federal Reserve is scheduled to meet next week, and decisions made during the meeting could have a meaningful impact on various aspects of the financial market, from interest rates offered on credit cards and loans return on deposit account and bonds.
And, the outcome of the Fed meeting can also have an impact on it the price of gold. After all, gold is considered a safe assetand factors that affect financial markets can also have an effect on the price of gold. So, if you think about it invest in gold, you may want to make a move before the Fed meets. This is why.
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Why you should invest in gold before the June Fed meeting
Here are three reasons you should buy gold ahead of next week’s Fed meeting:
Rates may increase, causing gold prices to rise
When the Fed meets, one of the topics of discussion is the federal funds rate, which is the benchmark for consumer interest rates. The Fed uses benchmark rates to keep inflation at, or near, its 2% target. When inflation is too low, the Fed can lower benchmark rates to spur spending and encourage price growth. And, when inflation is too high, it may increase the benchmark interest rate to help consumer spending and minimize price growth.
In turn, this benchmark rate change can have impact on the price of gold. For example, an increase in interest rates often leads to a higher demand for gold, which causes the price to rise. It’s worth noting that since inflation has consistently been higher than the Fed’s 2% target over the past few years, the federal funds rate is currently standing at a 23 years old.
And, while the latest inflation report shows that inflation has cooled compared to its peak, the rate is still 3.4% in April, which is higher than the Fed’s target rate. So, a rate hike is one outcome of the Fed meeting.
If the Fed raises the federal funds rate, or if there are concerns that a rate hike could happen, gold prices could rise as demand rises. So, it might be wise buy gold before the Fed’s June meeting.
Start investing in gold here before the Fed meets next week.
Gold prices are now down from record highs
The current spot price of gold is $2,347.39 per ounce (as of June 7, 2024). That’s down about 4% compared to the most recent record at $2,439.98.
And, the price of gold may go up again. For starters, not only will the Fed meet next week, but other drivers that could push gold demand are in place. Inflation is still a cause for concern, and ongoing geopolitical tensions may also help push price growth in the future.
So, it can be a smart move to invest in gold now when the price is lower than it was a few weeks ago. That way, you can benefit from future benefits.
Gold acts as an inflation hedge and diversification tool
Gold too inflation hedge and diversification tool for many investors, so if you need an asset that can offer these unique benefits, gold can be a good choice.
For starters, gold prices historically rise along with the prices of goods and services when inflation is high. So, adding gold to your portfolio can help offset inflation-related losses from other assets in your portfolio.
Gold does not typically move in tandem with stocks, bonds and other traditional portfolio assets. So, adding it to your portfolio can increase your risk-adjusted returns. And, with potential changes to monetary policy just days away, it might be wise add gold to your current portfolio.
Bottom line
The Fed meeting next week could push gold prices higher. And, since gold prices are now down from their all-time highs, buying now means you can get a relative discount. Additionally, adding gold to your investments can help protect your portfolio by acting as an inflation hedge and diversification tool. Compare gold investment options now, before the Fed meets next week.