3 things affecting gold prices now

As many investors know, there's a lot of uncertainty in today's economy. Interest rates are rising, inflation — while cooling — is still up and we could be headed toward a recession before the year ends. 

Given that uncertainty, secure assets like gold can make an appealing prospect for those looking to mitigate some risks in their long-term investment plans.

Gold prices, like many other markets, are influenced by a number of broad economic factors. Those factors can increase demand for gold, in turn pushing its value up. If you're considering investing in gold, it can benefit you to understand the things that can change your investment value over time. To get started, we've outlined three things affecting gold prices today.

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3 things affecting gold prices now

Here are three factors impacting the price movements of gold today:

Inflation and interest rates

Since last spring, the Federal Reserve has instituted a series of interest rate hikes designed to bring down inflation. In recent months, the Fed's rate hikes have lowered from 50 to 75 basis points at a time to 25 — and has even begun signaling it could be ready to pause further rate hikes (while still keeping rates high), as inflation starts to cool. There are a few ways these moves have had an effect — and continue to now.

For one, inflation itself can lead to gold's price rising. The value of gold tends to increase when inflation pushes the value of the U.S. dollar down, and gold's price has climbed as inflation persisted over the past several months.

Rate hikes themselves can sometimes have the opposite effect, and lead to gold's value going down. In fact, when rate hikes started in March 2022, gold's price initially dropped. When interest rates rise and increase the yields offered by other secure savings or investments, those options can hold more appeal for the risk-averse. But if the Fed decides to pause rates in the near future, some investors may again turn to gold — increasing its demand and value.

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Recession fears

Amid lasting inflation, interest rate hikes and market volatility, many Americans have anticipated a recession for months already. Fed minutes released in April, too, included a staff economic outlook prediction for a recession this year. Citing the bank failures earlier this year, Fed staff projected "a mild recession starting later this year, with a recovery over the subsequent two years."

Just like when the dollar's value drops, market volatility caused by a recession could make gold more appealing to some investors. After all, gold prices move independently of the stock market, and diversifying with gold may help you maintain value when other investments drop.

While no one can predict the future, signs today pointing toward a recession may be leading some to choose gold, in turn increasing its value.

Debt ceiling

The U.S. could face a default on its debt without action from Congress in the next few weeks — leading investors to preemptively seek out safer investment options like gold.  

"The possibility of an imminent default by the U.S. government is certainly concerning," says Andrew Mastro, CFP, president and founder of Wrought Advisors. "This has never happened before and no one can say with confidence what all the ramifications would be."

Given the volatility a default could inflict on the stock market, some investors may turn to gold for added security. While that is a factor pushing up gold's price in recent weeks, it could also lead to an increase in its future value. Based on the fact that gold proved to be a safe haven during the 2008 financial crisis, Mastro says it's possible gold prices could rise if there is a debt default and more investors buy in.

The bottom line

While it may be down from recent highs, gold's price is in an overall period of growth — and experts believe it could still increase in the months to come. Because gold is often viewed as a safe haven and hedge against some riskier investment types, its price can depend on the broader macroeconomic environment. Today, inflation and interest rate changes, growing concern over a recession and the looming debt crisis play a part in gold's appeal to investors.

If you're looking for a way to secure your portfolio against uncertainty today, allocating a portion of your investments to gold could help. You can learn more about your gold options with a free investment guide.