Gold prices have surged this year, rising about 8.5% in 2022, and it briefly topped $2,000 an ounce for the first time since August 2020. Next milestone in sight: The all-time high of above $2,060, also from the summer of 2020.
Gold, which had already been rallying before Russia’s invasion of Ukraine, is now benefiting from geopolitical turmoil as well as broader inflation fears. Gold often is viewed as a hedge against rising prices and a classic fear trade. Another precious metal, palladium, is also soaring. It hit a new all-time high Monday.
As long as oil prices continue to skyrocket, gold and other commodities may go along for the ride. The worry is that inflation could wind up turning into stagflation…an economic slowdown accompanied (and perhaps even caused) by soaring energy prices.
The rally in gold “reflects the nervousness…about stagflationary pressures,” said Hussein Sayed, chief market strategist at Exinity, in a report Monday morning. Sayed noted that in addition to the spikes in gold and palladium, the prices of aluminum, copper, zinc, corn, and wheat are surging too.
That, Sayed believes, “complicates the outlook for central banks across the globe.” The Federal Reserve is likely to raise interest rates at its next meeting later this month, but it has to be careful to not go too far and rattle already nervous investors and consumers.