Analysts predict that gold prices have still plenty of room to climb on the back of rising U.S inflation rate and continuous surge in oil prices as risk-averse investors take shelter in gold. Federal Reserve’s Chairman Jerome Powell will support hiking interest rates by 25 basis points in the two-day Federal Open Market Committee (FOMC) meeting scheduled for March 16.
The real interest rates are negative because of the oil price spikes and the Ukrainian situation, making gold an ideal investment in such a scenario. Portfolio managers and analysts recommend allocating at least 5% to 10% of wealth to gold and other precious assets.
Some analysts think that gold stocks can also be a decent investment option in the current situation to benefit from rising gold prices. You might find some gold stocks that are cheap and can provide great upside potential in the backdrop of a propitious environment for gold. If you think that gold price surge has already been priced in the gold stocks, you can consider buying them on dips to have a decent-sized exposure to benefit from potential future rise in gold prices.
Gold prices have surged 9% so far during the year but, going forward, they can be volatile. So, investors should be ready to face the volatility as markets react to new geopolitical and economic situations across the globe.
Conclusion
Gold prices have been trending upwards since the start of the Ukrainian war. Rising inflation, surging oil and commodity prices, supply chain disruptions are all contributing to spike in gold prices. Uncertainty in the markets is prompting investors to buy gold as the metal is known to act as a haven from turmoil in the market and provide a hedge against inflation.
Analysts predict that geopolitical situation and inflation would continue to keep gold on the radars of investors soon, which is a good reason to start investing in gold to shield portfolios from the negative fallouts of the war and inflation. The International Monetary Fund is likely to trim its estimates for global growth as the turbulent markets will have spillover effects on the global economy.
If the war and the resultant turbulence in the commodity and oil markets subside, gold prices may decline. But the inflation is likely to stay as price levels usually take longer to recede, which might prompt central banks to keep interest rates on the higher side. Still, the near-term projections of analysts lead us to believe that investment in gold in the current circumstances could be a sensible decision.
