As of May 20, 2024, gold’s price has surged, breaking numerous price records. Starting at $2,063.73 per ounce on January 1, the yellow metal rose as high as $2,439.98 per ounce. While gold’s price has dropped slightly since the record was set, it is still comfortably above its starting price of $2,297.47 per ounce as of June 10.
Several factors influence the price of gold, and some may influence it as early as mid-week, which gives prospective investors a reason to get started right now. This could change significantly this week, which allows prospective investors to take action now.
Understanding these factors will help investors better time their investments and profit quickly. Below, we provide three reasons gold may change significantly this week—possibly by a significant margin.
This week’s gold price may change for several reasons
As the week progresses, three major factors could influence the price of gold.
The new inflation report will be released.
Known for its ability to hedge against inflation by maintaining its value and even increasing in value during inflationary periods, gold has seen its popularity (and price) increase in recent years as Americans have dealt with increasing costs. In addition, the Bureau of Labor Statistics will release its latest inflation report on June 12.
Earlier reports in 2024 have been mixed, partially contributing to the surging gold price. And inflation only dropped from 3.5% to 3.4% in April, so inflation appears stubborn. In such a case, gold’s price may adjust to accommodate investors seeking alternative relief if the May report is another disappointing one.
The Federal Reserve will meet again.
As inflation has cooled, optimism regarding a potential rate cut has increased. The federal funds rate remains at its highest point in decades after the Fed raised it last summer to a range between 5.25% and 5.50%.
However, if the inflation report released earlier that day shows little improvement, this optimism may collide with reality on June 12. Following the conclusion of the Fed’s latest meeting, which will occur on the same day, the Fed will have to decide whether to maintain or adjust the rate once more.
Gold, a safe-haven asset in economically challenging times, may rise once again if there is another adjustment upward with a rising inflation rate. However, suppose the inflation report is positive, and the Fed releases a rate cut or hints at one to come. In that case, the price of gold may adjust downward, giving investors an opportunity to invest at a lower price.
Investors may adjust their approach.
It is difficult to predict the approach investors will likely take to gold this week until both scenarios occur. However, what happens if inflation drops and the Fed retains rates? Several scenarios might affect the economy, causing some investors to adjust their approach to gold. For example, does the Fed discuss a rate cut for later this year if inflation remains stagnant? Consequently, the price may rise or fall, perhaps even significantly.
Therefore, it makes sense to invest in precious metals before the price becomes prohibitive and lose out on protections you may require by the end of the week.
The bottom line
Inflation and the Federal Reserve’s efforts to control inflation are major factors influencing the price of gold this week. High beginner investors should consider entering the gold investing market now, while the price is still manageable and benefits are still timely, in light of the prospects for a revised investment approach from many based on these scenarios. As long as you maintain a moderate investment level, most experts recommend capping it at 10% or less of a diversified portfolio.
