Analysts are scratching their heads trying to figure out why gold is on a tear right now. The commodity hit another record high Tuesday, April 9, ahead of Wednesday’s inflation report and the release of the Federal Reserve meeting minutes, where investors get a behind-the-scenes look at what the Fed is thinking in terms of cutting interest rates this year.
Gold is considered a safe-haven asset, a hedge against inflation and a place investors turn in times of geopolitical risk. Also, when interest rates go down, gold typically goes up.
The question remains, why the records now? There’s not one definitive answer. Geopolitical tensions have been going on for months while, and when the Federal Reserve will cut rates seems murkier than just a few months back. And that’s in part because while this shiny commodity is surging, so are others.
The commodity index, which contains a basket of commodities, is outpacing the S&P 500 index in 2024. That is driven by surges in copper, up more than 11%; gold, up around 14%; and oil, up about 18%.
Strong copper prices indicate a healthy economy, in part because the metal is widely used in construction and electronics. Higher demand for copper typically means more growth, but it also means as prices rise, that growth becomes more expensive.
A number of things around the world can impact oil prices, like Ukrainian attacks on Russian energy facilities, or the seasonal summer surge. Sunnier global economic outlooks are only fueling oil demand. But Americans know the rising price of oil is one of the places they feel inflation the most and in the most immediate way.
The Federal Reserve is still forecasting three rate cuts in 2024, but as the economy and commodities continue to surge, inflation looks stickier and investors are starting to question if interest rates will stay higher for longer than originally expected.