Investors Become Gold Diggers
Your jewelry might soon be worth more than your stock portfolio! Gold is rallying after the Federal Reserve gave an agnostic view on world events yesterday. That may have helped out Bitcoin too, as the US dollar slumps to let its alternative safe havens enjoy the spotlight.
Gold here, the US dollar there. What’s going on? Well, while stocks ultimately prove the most lucrative place to park money, investors rarely go all-in. Keeping some money in cash allows investors to capitalize on surprise opportunities and anchor their portfolio with less risk. Gold is a supposed substitute for cash because apart from looking pretty, the precious metal has historically held its value. Often in times of geopolitical peril, a mini gold rush will be triggered as investors dive for cover into the “riskless” asset. Bitcoin, a “digital gold,” is also rallying as an alternative to stocks.
The surges, especially that of gold, can be attributed to Mr. Jerome Powell, Chairman of the Federal Reserve. With only days remaining before a crunch G-20, Powell has backed off on a market-boosting rate cutting policy that investors expected. While he admitted he was still grappling with the decision, President Trump’s pressure tactics for rate cuts aren’t working on Powell. The Fed Chair remarked that “the Fed is insulated from short-term political pressures.” But that’s what they all say.
In sum, interest rates are on a knife edge. So is the stock market. Without trade clarity by the opening Monday morning bell, these new comments from Powell suggest the market could be in for it… Investors are already scrambling for safety, shooting gold up 9% this year, so will you stick to your investing script? Or do world affairs have you on gold fever?