Defying expectations, gold prices have decreased this year in the face of inflation.
Key Details
- Gold is on its longest losing streak since 2018. The precious metal is typically considered a safer investment, providing stability in economic uncertainty. Prices were high this year following the economic unrest that came alongside the Russian invasion of Ukraine.
- The precious metal reached its high for the year in March at $2,069.40 an ounce. Now, it is down 7.9%.
- Since June, gold has been trading between $1,650 and $1,800. It recovered slightly on Friday, increasing .4%.
- Higher interest rates from the Federal Reserve are in part to blame, showing how the high rates have infiltrated every part of the market.
Why it’s news
Typically a stable form of currency, gold underperformance is a cause of concern among investors.
“The outlook for gold remains vulnerable until the Fed stops hiking rates,” says senior trader at Heraeus Precious Metals Tai Wong.
Gold prices are expected to continue their descent, according to JMorgan Chase & Co. analysts. Prices are expected to average $1,650 an ounce by the fourth quarter.
Demand for gold has also changed as more investors have bought U.S. currency which is now closing in on 20-year highs. These prices have driven up the cost of gold for those buying outside the U.S., lessinging demand.
The world’s largest exchange-traded fund with backing from physical gold, SPDR Gold Shares, is down 2% so far in September, showing gold is suffering globally.
Despite a dip in the market, gold is still a better option than stocks right now, at least according to London Bullion Market Association executive Ruth Crowell, noting that the S&P 500 is down 19% so far this year.
If the Fed slows the rate of increases next year as many experts think it will, gold prices could go back up. By next year, gold prices could be around $1,820 a troy ounce, according to JPMorgan analysts.
