This time around, gold has shown itself to be a safe haven investment. Since bullion prices have decreased this year, they have beaten other key asset classes including equities, bonds, and cryptocurrencies in terms of performance.
It should be a reminder to cautious investors to consider devoting a part of their portfolio to the yellow metal.
Investment expert Sam Stovall of CFRA thinks that defensive asset classes like gold and other inflation hedges hold up better in difficult times than more risky investments like stocks. “It’s not that they rise, but that they fall less.”
This is based on the most recent evidence. As of June 14, the SPDR Gold SharesGLD +1.12 percent ETF (ticker: GLD) has lost 1.4 percent over the last year, according to Morningstar.com. Consider how gold’s mild decline compares with the 31% decline in the tech-heavy Nasdaq-100 index tracked by the Invesco QQQ TrustQQQ –4.03 percent (QQQ) and the 21% decline in the SPDR S&P 500SPY –3.32 percent (SPY), which monitors the S&P 500 index. Dividends are included in the total return.
The performance of fixed-income securities was very terrible, too. Stocks in the iShares iBoxx $ Investment Grade Corporate BondLQD +0.11% ETF (LQD) have lost 18% of their value in the last five and a half months.
But probably the greatest shock, particularly for crypto aficionados, is that Bitcoin, the original cryptocurrency, has lost more than half of its value this year. That is at variance with the prevalent narrative of the previous few years, which taught that these digital assets will take the place of the yellow metal as a refuge in tumultuous times. It should be evident now that the reverse is true, at least this time.
Stovall describes cryptos as “the ultimate of speculation” since there is no way to value them. “I believe crypto now is what dot-com was in the 1990s.” Due to investors’ realization that revenue-free firms would not continue to make appropriate investments, the dot-com bubble of the late 1990s came to an end.
Gold, on the other hand, has passed this current test while crypto has failed. Even better, investors can still get in on the ground floor. To be on the safe side, though, you should use caution.
Rohit Savant, a vice president of research at commodities consultancy company CPM Group, believes that gold still has room for improvement.
According to analysts, a troy ounce of gold was sold for $1,847. Savant estimates that the price of an ounce will decrease another $40 to $50, bringing it down to around $1,800. According to him, there will be a lot of fluctuation in pricing over the next year and he wouldn’t be shocked if the price reached $1,900 in the next year.
Gold, on the other hand, seems to be a superior long-term investment. According to Granite Shares’ CEO and founder Will Rhind, “Conditions for gold are excellent,” with both soaring inflation and falling stock and bond markets creating a climate of fear.
Inflation has risen sharply. As of May, it has risen to an annual rate of 8.6% from a low of 5.3% in August, according to statistics from TradingEconomics.com. And the experts don’t anticipate a break in the clouds any time soon.
Rhind, however, adds that the strong US dollar is limiting the metal’s price. According to TradingEconomics, the dollar index, which measures the value of the greenback concerning other major currencies, touched its highest level since 2002.
Rhind believes that the dollar’s rise will eventually come to an end. He predicts that the gold price will soar at that point.