Gold prices are dominating news headlines as central banks push the metal to record highs even amidst significant outflows. Investors and market analysts have been attracted by this contradictory situation. Professionals suggest that it could be a good time to buy gold despite its hovering close to historic peaks.
The Surge of Gold Triggered by Central Banks
This week Michael Hartnett, a chief investment strategist at Bank of America made an astonishing recommendation, advising investors to buy gold following suit with central banks. In a note on Thursday, Harnett said, “Do what central banks are doing buy gold.”
Gold has risen about 20% so far in 2020 surpassing S&P 500’s gains and even overtaking technology stocks. With China being the biggest buyer of the precious metal in 2023 according to him, there lies an historic shift in global economic strategies.
Hartnett hinted out that as such; gold is now the world’s second largest reserve asset behind only US dollars surpassing euro and having one of the lowest correlations across stock asset classes.
What has caused this rally? The answer given by Hartnett is unprecedented buying by central banks. He noted that China’s central bank was the largest gold buyer in 2023 thus pointing towards a notable change in policies pertaining to international finances.
For those who want to make money from this trend, Hartnett recommends that they consider IAUM and GLDM (top-rated) among other gold ETFs. On Friday, the price of gold was up 1.23% at $2,547.60 per ounce or only $23 away from reaching its all-time high.
Focus on the Federal Reserve
With continued strength in the bullion market attention shifts towards the next steps expected from The Federal Reserve. Fed Chair Jerome Powell will deliver his keynote address at annual Jackson Hole symposium coming up later this week on Friday. All eyes are fixed on his speech for any signs of future interest rate moves as recent economic indicators demonstrate potential shifts in policy.
This speech could offer important insights into the Fed’s stance on inflation and joblessness during this changing environment. Investors and economists are eagerly waiting for his words to have a better idea about what will happen with the economy.
Gold is surging due to central bank buying hence making it one of the best performing assets today. Now may be the ideal time for investors to listen to Hartnett and include gold in their portfolios given that possibility of rising inflationary pressures.
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