Gold spiked to an all-time high above $2,500 per ounce early Friday, sending the SPDR Gold Shares ETF (GLD) up nearly 1.5% as the dollar softened amid rising expectations that the U.S. central bank will cut interest rates in September.
The precious metal was recently up almost 2.5% after trading roughly flat over the past month. The dollar was down about 0.4% on Friday, according to Wall Street Journal data, and is off about 1.8% over the past month.
“Besides the fact the Chinese are purported to be massive buyers, the recent rise is due to softer or weaker economic data which supports Fed rate cuts,” said Paul Schatz, president of Heritage Capital in Woodbridge, Conn.
“Lower rates are usually, but not always, a tailwind for gold, as easier money often leads to higher prices,” he added.
GLD is up more than 17% this year on rising macroeconomic uncertainty—including sagging jobs data, possible U.S. central bank missteps and a potential U.S. recession—that have heightened volatility. But the Fed is now widely expected to cut rates at its next Federal Open Markets Committee meeting, which begins Sept. 17, perhaps as much as 50 basis points.
Investors will be eyeing comments by Fed Chair Jerome Powell next week at the annual Jackson Hole Symposium for dovish monetary signals.
GLD’s 26% Spike Over the Past Year
GLD has soared 26% over the past 12 months, compared to five- and 10-year annualized returns of 9.7% and 6%, respectively.
For comparison, the SPDR S&P 500 Trust (SPY) is up 12.8% this year, 21% over the past 12 months, and has generated five- and 10-year annualized returns of 14.6% and 12.7%, respectively.
Gold’s price often spikes in times of economic uncertainty because investors view it as a safe haven asset and sometimes use it as a hedge against inflation.
“With gold up, many investors are wondering whether they should own it in their portfolios,” said Chuck Etzweiler, senior vice president of research at Nepsis in Savage, Minn.
“We view gold as a currency hedge and not as an investment,” he added. “If a country’s currency is in the process of a period of devaluation, it may provide some protection. However, over the longer term the results greatly favor business ownership of publicly traded companies as the most ideal pathway to not only wealth creation but wealth preservation as well.
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