Gold is having its hottest year in almost half a century – since the global energy and inflation crises of 1979.
David Gray / AFP via Getty Images / AFP
hiding place
switch legend
David Gray / AFP via Getty Images / AFP
Gold broke another record high this week, illustrating how anxious investors are about the health of the U.S. economy.
This week, the price of gold reached $4,000 per ounce for the first time. This is the latest milestone in its ongoing massive rally, with prices rising more than 50% just this year.
The precious metal is generally considered a “safe haven” investment, especially when more traditional assets seem risky. The flamboyant demand for its perceived security coincides with President Trump’s dramatic and often erratic economic policies, including upending global trade and threatening the independence of the Federal Reserve.
On the surface, Wall Street appears to have mostly hyped up this spring’s concerns about Trump’s policies. In recent weeks, major U.S. stock indexes have hit record after record.
But at the same time, the value of the US dollar fell by around 10%. This threatens both the stability of the global economy as the dollar undercuts much of its financial system and the long-established dominance of the United States as the world’s economic superpower.
“Gold generally goes up when the dollar is weak,” says Jose Rasco, chief investment officer for HSBC Americas.
“Given all the uncertainty about policy, people said, ‘We’re not sure about the dollar’…and the dollar depreciated as a result,” he added.
Now gold is having its hottest year in almost half a century – since the global energy and inflation crises of 1979.
And it shows no signs of stopping: this week, analysts at Goldman Sachs predicted that the price of gold would reach $4,900 by the end of 2026.
Daan Struyven, Goldman’s co-head of Commodities Research, co-authored this report. He tells NPR he wouldn’t be surprised if Gold beats his lofty expectations (or has what he calls “upside risk”).
“While our price forecast is quite high, we actually see upside risk to this high price target,” says Struyven
Gold may be known as a ‘safe haven’ – but there are risks and costs to buying it
Gold has long enjoyed a reputation for offering security in what is known as the “fear trade.” As a gleaming precious metal that can be held (and has been hoarded!), Gold offers the appearance of security and solidity next to stocks and other (often less material) financial instruments.
“When it looks like the world is going to hell in a basketball, gold usually appreciates,” Lee Baker, a certified financial planner who is the founder and CEO of Claris Financial Advisors in Atlanta, told NPR this spring.
But he warns that there can be downsides to buying and owning gold – even in times of crisis. For example, unlike stocks or bonds, gold does not pay any dividends or interest. So the only way to make money from this investment is to buy some and then hope to sell it after the price rises.
There are also physical and logistical challenges to investing in gold – especially for people who want to buy the real thing. For example, buyers should consider how to store it – and whether to pay for the security and insurance necessary to keep precious metals in their homes.
For those who are curious about gold but may not be ready to adopt a Doomsday-Pripper lifestyle, Baker notes that it is possible to invest in gold-backed funds that do not require physical ownership of precious metals.
More broadly, he says the current gold frenzy highlights a larger lesson about investing in more than one asset class, like stocks.
“Your mom told you not to put all your eggs in one basket. This also applies to investing,” he says. “Diversification is important.”
