Gold () futures opened at $3,398 per ounce Thursday, up 0.7% from Wednesday’s close of $3,373.50. The price of gold today rose above $3,400 in early trading as investors wait for definitive progress on U.S. trade deals.
While economic data has largely remained stable since the start of the trade war, signs of negative sentiment are emerging. On Wednesday, a U.S. auto industry group warned that China’s restrictions on rare earth exports – a retaliation against tariffs – may soon disrupt vehicle production. Thursday, , polling senior executives in U.S. companies, revealed a sharp downturn in optimism about the economy. Negative economic and political sentiment often increases gold demand, which is considered a store of intrinsic value.
The opening price of gold futures on Thursday is up 0.7% from Wednesday’s close of $3,373.50 per ounce. Thursday’s opening price marks a gain of 3.5% over the past week, compared to the opening price of $3,283.70 on May 29. In the past month, the gold futures price has risen 4.8% compared to the opening price of $3,242.70 on May 5. In the past year, gold is up 46% from the opening price of $2,326.40 on June 5, 2024.
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Investing in gold is a four-step process:
Set your goal.
Set an allocation.
Choose a form.
Consider your investment timeline.
After deciding why you want to invest in gold and selecting the size and form of your gold investment, consider your investment timeline as a final suitability check.
Gold can be volatile. It has demonstrated extended periods of decline in the past. Extended periods of decline are not acceptable if your timeline is short. The risk is too great that gold’s price will be down when you need to liquidate.
An extended holding period provides greater potential for reaching your investment goals. As an example, hedging against stock market declines or inflation is a long-term effort. These outcomes will continue to be risks as long as you own stocks or cash deposits. Holding gold as insurance against an economic calamity requires you to keep the asset until you need it.
A small gold position can act as a stabilizer for your stock portfolio and your purchasing power. If you choose physical gold stored at home, it can also stand in as currency in the worst of economic crises. Just know that gold has underperformed stocks in the past, so choose your target allocation accordingly.
Whether you’re tracking the price of gold since last month or last year, the price-of-gold chart below shows the precious metal’s steady upward climb in value.
Historically, gold has shown extended up cycles and down cycles. The precious metal was in a growth phase from 2009 to 2011. It then trended down, failing to set a new high for nine years.
In those lackluster years for gold, your position will negatively impact your overall investment returns. If that feels problematic, a lower allocation percentage is more appropriate. On the other hand, you may be willing to accept gold’s underperforming years so you can benefit more in the good years. In this case, you can target a higher percentage.
The precious metal has been in the news lately, and many analysts are bullish on gold. In May, Goldman Sachs Research predicted gold would reach $3,700 a troy ounce by year-end 2025. That would equate to a 40% increase for the year, based on gold’s January 2 opening price of $2,633. Rising demand from central banks, along with uncertainty related to changing U.S. tariff policy, are the factors driving the increase.
finance.yahoo.com
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