Investors often turn to gold as a safe haven investment in times of global turmoil. Gold’s also rising on falling stocks.
Gold is on the rise, trading near a 21-month high, after the news that Russian President Vladimir Putin ordered troops into Ukraine.
Investors often turn to gold as a safe-haven investment in times of global turmoil. Falling U.S. stocks have boosted gold, too, as it also tends to gain from financial turmoil. The S&P 500 has slid 9% year to date.
In addition, gold is benefiting from soaring inflation, as the precious metal is viewed as a hedge against rising prices. The U.S. consumer-price index jumped 7.5% in the 12 months through January, an almost 40-year high.
The April Comex gold contract recently traded at $1,903.90 an ounce, up 0.22%. Earlier Tuesday, it reached $1,918.30, its highest level since November 2020.
As for the Russia-Ukraine conflict, “Investors are looking for a geopolitical hedge,” Matt Miskin, co-chief investment strategist at John Hancock Investment Management, told The Wall Street Journal. “The stars are aligning in essence for a gold breakout.”
An escalation of fighting in Ukraine could push gold through its August 2020 record close of $2,051.50 within months, he said.
Chris Vermeulen, chief market strategist of TheTechnicalTraders.com, sees gold headed a lot higher than that. He told Kitco news service that the precious metal could reach $2,700 in one year and up to $7,400 in five years.
Gold sits in the midst of a long-term technical upward cycle that resembles the beginning of 2008, he said.
“I think we started back in 2019, and this is about a five-year cycle for gold,” he said.
Vermeulen noted the stock market’s recent struggles. “We’ve had a very long bull market, I think things are getting a little long in the teeth in terms of the equities side,” he said. “When the stock markets get to the late stages, this is where we see commodities come to life.”
To be sure, many experts say rising U.S. interest rates will cap gold’s gains. Higher rates may subdue inflation, and they make gold, which pays no income, less appealing to investors compared with bonds.
