Gold has always been used as a safe haven asset, especially during times of uncertainty or rising inflation. This is primarily because the precious metal retains its value and helps investors limit exposure to loss during market turbulence.
During the coronavirus pandemic, which affected economies globally, gold became a favorite of investors. During the last three years, the precious metal has surged 18%, and it has risen by 41% in total over the last decade. Additionally, one poll determined that one-quarter of Americans consider gold a good asset to invest in long-term.
The price of gold is set to hit a new record as more investors turn to the precious metal in this volatile environment. So far this year, the price of gold has risen by 10%. Gold mining stocks have recorded surges, with shares of Kinross seeing a 27% rise. Gold Fields, Royal Gold, Franco-Nevada and Barrick Gold shares have also trended up, reporting 50%, 19%, 14% and 10% increases respectively.
Analysts expect that the looming recession will afford the precious metal even more time to run. Mark Haefele, global chief investment officer at UBS, stated in a note that gold could soon surpass its all-time high. Haefele set a $2,200 target for the precious metal for March 2024, which equates to an 8% increase. He believes that stress in the banking sector, a weakening U.S. dollar, easing expectations on interest rates and the growing likelihood of a recession all strengthen the precious metal’s prospects.
Cleve Rueckert, another analyst at UBS added that gold was driven by macro variables such as the influence of the U.S. dollar and real rates in the U.S., rather than demand and supply. He explained that the increase in the price of this metal was unique and had very little to do with its uses.
Edward Moya, an analyst at Oanda, stated that the excess of risk in America and abroad would add fuel to the demand for the precious metal, noting that this was a win-win scenario for gold.
To gain gold exposure, investors should consider purchasing futures contracts for gold or physical gold. This is in addition purchasing shares of public companies that mine the metal or buying exchange traded funds (ETFs) holding the precious metal.
Not everyone backs the idea of investing in this particular metal though. For instance, Warren Buffett, a billionaire and legendary investor in his own right, has for a while now maintained that investing in gold doesn’t produce any value.
For investors interested in acquiring gold stocks, it is advisable to do ample due diligence on several companies, such as Freeport-McMoRan Inc. (NYSE: FCX), before making a final decision on where to put your money.
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