Gold’s Time to Shine?

Jul 01, 2023

Recently, Morgan Stanley said, “Gold’s Time to Shine? Gold has long been viewed as a ‘safe haven’ for investors in a slowing economy. Now may be a good time to add it to your portfolio. Christopher K. Baxter at Morgan Stanley explained with the Key Takeaways!

1: Gold has historically acted as a hedge against inflation by rising in value when the purchasing power of the U.S. dollar wanes.

2: It may also act as a buffer against stock market volatility during economic slowdowns. &

3: A weaker dollar, potentially lower interest rates and central bank buying could support higher gold prices through year-end.

Investors have long considered gold as a safe haven that can help diversify their portfolios and weather turbulence in the economy and markets. One of the world’s oldest forms of currency, the precious metal has historically acted as a hedge against inflation by rising in value when the U.S. dollar’s purchasing power wanes.

In addition, gold is largely uncorrelated to U.S. equities, meaning its value doesn’t typically follow the same ups and downs, potentially making it useful for investors during times of economic stress. In fact, in six of the eight U.S. recessions since 1973, gold outperformed the S&P 500 Index.

With the price of gold near an all-time high, there are three key reasons to consider investing now,

1: A weaker U.S. dollar is generally good for the price of gold,

2: Declining interest rates could drive up the price of gold,

3:  Central banks are buying gold at a rapid pace,

3a: Gold may be a way to hedge the inflation that many countries continue to experience.

3b: Some countries are looking to diversify away from major currencies like the U.S. dollar, euro, Japanese yen and British pound.

3c: Developing countries’ central banks remain under-allocated to gold relative to their developed-market peers.

While gold’s prospects depend heavily on the direction of the U.S. dollar and interest rates, its traditional role as a safe-haven asset during difficult economic times and as a hedge against slowing growth, along with potential long-term support from central bank buying, may signify its growing importance in an investment portfolio as part of a risk-management strategy.

To learn more, ask your Morgan Stanley Financial Advisor for a copy of the May 17 Global Investment Office report, Global Insights: What Will Drive Gold from Here?  Your Financial Advisor can help you assess tactical opportunities to invest in the precious metal as well as how your portfolio may benefit long-term from exposure to gold.

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