A rise in gold prices has intrigued investors and sparked a new interest in the precious metal. On Monday, the spot price of gold peaked at $2,135.40, and while it has cooled off from those peak highs, it continues to hover around $2,000 per ounce. Experts say that there are multiple ways for investors to gain exposure to gold in their portfolio, even as some question the value of joining a modern-day gold rush.
Allan Small, a senior investment advisor with iA Private Wealth, attributes the increase in gold values to a few simultaneous factors, including gold’s reputation as a safe haven during times of uncertainty and when the U.S. dollar is weakening. The Israel-Hamas conflict that has been ongoing since October is also likely pushing gold’s value higher, according to Small. Cultural factors like gold also play a role in driving up the metal’s value. In the last few years, we have witnessed a trend among central banks to flood the market with a stimulus and investors prefer alternative assets, such as cryptocurrencies and gold.
Experts are noticing that gold’s price soaring along with bitcoins and other cryptocurrencies, as the U.S. dollar struggles in the wake of a potentially lower interest rate environment. They also note that Costco’s decision to offer gold bars to everyday consumers reflects growing skepticism regarding traditional banking systems.
Despite the surge in value, Allan Small isn’t a big fan of gold, saying that its value is more “speculative” in nature and doesn’t follow traditional supply-and-demand patterns, unlike other commodities like oil or copper. On the other hand, Greg Taylor believes that there is a place for assets like gold in a portfolio, adding that it doesn’t need to see “parabolic” growth to have value for investors. He suggests that owning real assets such as gold can buffer against traditional investments like equities and fixed-income products in a basket of investments, as they are “less correlated to the economic cycle”.
Overall, it’s unclear whether the surge in the value of gold is a fleeting trend or a lasting shift. With global uncertainty and a hit on the U.S. dollar, investors are likely to continue seeking a “hedge” against economic downturns and lack of trust in traditional banking systems. However, without practical uses, the value of gold is reliant on the “demise of something else,” such as the weakening U.S. dollar. Therefore, whether one decides to invest in gold should be based on their portfolio diversification, economic climate, and potential future financial opportunities and risks.
