Gold Price Blows Past US$2,000 Mark Again, Silver Hits US$25

Why is the gold price rising?

Gold's strong rise on Tuesday came amid mounting speculation about future policy from the US Federal Reserve.

The yellow metal's appeal was boosted thanks to new US data showing that job openings for the month of February declined to nearly a two year low of 1.7 job openings per person; that's down from 1.9 in the opening month of 2023. Despite this cooldown, a report from the Associated Press indicates that the job market “remains tight.”

Job openings measure demand for labor, and a lower number suggests that the Fed is seeing success in its efforts to tame inflation and may stop hiking rates or even reverse course. This news has weighed on the US dollar, but has propped up gold.

The Fed's latest move came at the end of March, when it increased the benchmark overnight interest rate by quarter of a percentage point. At the time, the central bank indicated that further increases would largely depend on future data.

A full report from the Labor Department is expected on Friday (April 7).

The gold price has also been affected this week by developments in the oil sector. The market has had to strap in for a bumpy ride, as OPEC+ countries announced a surprise output cut, leading to a rise in oil prices. OPEC, known formally as the Organization of the Petroleum Exporting Countries, consists of 13 member countries, with an additional 10 making up OPEC+.

Some experts have suggested that elevated oil prices could push inflation higher. While the Fed is more likely to keep rates elevated if inflation remains persistent, gold's appeal as a hedge would be boosted in this scenario.

Should investors buy gold at US$2,000?

Investors are often told to buy low and sell high, and with gold near its all-time high it may not seem like the right time to get into the market. However, as two experts outlined, there are nuances to the current situation.

David Morgan from the Morgan Report recently told the Investing News Network that those with a long-term view on gold should consider how high the yellow metal may rise in the future given factors like the recent banking failures in the US.

“There’s no fever like gold fever, so you’re better to have US$2,000 an ounce gold than no gold if this continues," he said. "And unfortunately I think the can has been kicked down the road and it doesn’t have any further to go."

Similarly, Joe Cavatoni, chief market strategist, Americas, at the World Gold Council said investors with a strategic mindset on gold shouldn’t focus so much on the day-to-day price of the commodity.

“A high price may or may not be an impediment to someone who is making a strategic allocation to gold,” Cavatoni said.

The expert explained that investors sometimes become too keen on the price and may get hypersensitized to high levels, but a different mindset is needed when thinking about gold on a strategic level.

“When you start talking about a strategic allocation and you’re really shifting the mindset of what you’re doing around a portfolio, the price is important, but what you see … (is) that the expected long-term returns for gold can range from 4 to 5 percent, based what you’re looking at and the time horizon that you’re expecting to hold the position.”

Aside from price, Cavatoni wants investors to consider their own funding options for any position, as well as what kind of “time horizon” they have in mind and how a gold position could affect the balance and behavior of their portfolio.

Investor takeaway

As major financial events trigger momentum for gold, it will be crucial for investors to monitor their portfolios and adjust accordingly to the shockwaves going through the market.