Wednesday, April 17, 2024

People are going crazy for gold in the world of finance

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Gold enthusiasts are celebrating because their favorite precious metal is reaching new highs. On Tuesday, the price of gold settled at $2,141.90 per ounce, breaking another record. Investors are betting that the Federal Reserve will reduce interest rates in the second half of the year.

Gold is seen as a strong investment. When interest rates go down, holding assets that pay income, like bonds, becomes less attractive than owning gold. Some investors also think gold is a safe bet against inflation, believing it will keep its value even if prices start to rise.

It’s not just traders getting into the gold trend. Costco started selling gold bars last September and made over $100 million in the first quarter of 2024. People tend to like gold during uncertain economic times because it’s a physical asset and less risky than stocks.

On a monthly basis, the core PCE price index, which excludes more unpredictable categories like food and energy, went up by 0.4%. Although this increase was expected, it was the fastest monthly rise since February 2023, a crucial measure of underlying inflation according to Fed officials.

Traders now think there’s about a 69% chance that the Fed will lower rates at its June policy meeting, according to the CME FedWatch Tool. This is lower than at the beginning of the year when investors were convinced rate cuts were coming.

Investors are waiting for Federal Reserve Chair Jerome Powell’s congressional testimony on Wednesday, hoping to understand what the Fed plans for the coming months.

Bitcoin, often called digital gold, has also surged recently. On Tuesday, it surpassed its previous record of $68,789 from November 10, 2021, breaking a two-year trend. Bitcoin pulled back from its highs on Tuesday.

Stocks have been doing well this year, reaching record highs. The S&P 500 has set multiple records, and the Nasdaq Composite reached an all-time high for the first time since 2021 last week as the AI boom continues on Wall Street.

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