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Why investors are turning to gold despite inflation cooling

Despite signs that inflation is cooling many investors are still turning to gold and the benefits it offers. Getty Images

As inflation heated up over the last few years, many investors turned to gold to hedge against related losses. Gold is often seen as a stabilizing addition to investment portfolios, especially during economic uncertainty or inflationary periods. Its historical stability and tendency to move inversely to traditional assets have long offered a safe haven for investors' wealth.

Inflation is now cooling, but that doesn't mean gold has become less attractive for some investors. Despite the declining rate of inflation, there are valid reasons many investors are attracted to gold, including its intrinsic value, scarcity and historical role as a store of value.

To understand gold's strong performance amid the current economic climate and why investors are still investing in this precious metal, it helps to dive deeper. Start by requesting a free investors kit here to learn more about this unique opportunity.

Why investors are turning to gold despite inflation cooling

Here are three reasons why investors are considering gold now that inflation is dropping. 

Gold prices are climbing

Gold has seen strong spot prices in recent months, surpassing the $2,000 per ounce mark in April for only the second time since its record high in August 2020. Gold has continued to hover around the $2,000 mark since then and sits at $1,970 as of July 31, 2023.

Even as inflation cools, the price of gold remains strong. "Investors are turning to gold because it's a good long-term investment, regardless of the current level of inflation," says Mark Charnet, founder & CEO of American Prosperity Group in Pompton Plains, New Jersey.

Gold's strong performance may be attracting speculating investors, who see its rising price as a sign of positive momentum. Additionally, gold has received significant media attention recently as the yellow metal approaches an all-time high price, perhaps spurring more public interest and investors.

Learn more about the benefits of investing in gold with a free information kit.

Gold provides a safe haven

Gold has a long-standing reputation as a safe haven asset in times of economic or political uncertainty. On the economic front, Peter C. Earle, an economist at the American Institute for Economic Research, cites the Federal Reserve's aggressive rate-hike schedule over the last 17 months as one of many factors driving up the price of gold, despite cooling inflation. "Many Fed tightening cycles end in recessions, and current economic data suggests that the US economy is weakening substantially," says Earle. As such, many investors may be turning to safety to protect their wealth.

And with the continuing war in Ukraine, rising tension between the United States and China and other global uncertainties, many investors are looking for a safe position. Fortunately, gold's value is not tied to any single government or economy, making it a global and resilient asset.

Gold hedges against inflation

Even though the rate of inflation is moving towards the Fed's stated target goal of 2% over the long run, the Fed has stated concern that core inflation, which doesn't account for food and fuel prices, remains significantly higher than the 2% target, hitting 4.8% in June.

In such environments, gold can help protect your money against inflation. Its supply is fixed, meaning we can't create more of it. Gold's price can rise and fall, but gold remains a reliable store of value in uncertain economic times due to its universal acceptance and finite supply. Consequently, when inflation lowers the value of money and other financial assets, investors often turn to gold to preserve wealth.

Should you invest in gold?

Whether or not you should invest in gold depends on your unique situation, financial goals, risk tolerance and several other factors. If you're looking to diversify your portfolio and reduce your risk exposure, gold investing is worth your consideration. Similarly, gold may help you protect your portfolio against inflation-related losses since the precious metal stands as a stable asset that preserves its value over time.

Still, your portfolio's allocation for gold and other precious metals should be proportionate to your risk tolerance level and your financial goals. Remember, financial advisors commonly suggest that allocation be no more than 10% of your portfolio. As with other investments, it's wise to consult with your financial advisor to determine if gold investing aligns with your overall financial plan.

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