Both stocks and bonds have faltered to start the year, with the S&P 500 down approximately 8% year to date and the Bloomberg Aggregate Bond Index down about 4%. However, this tough environment for traditional asset classes has given gold, an asset many investors have forgotten about over the past decade, some time to shine.
As shown in the LPL Chart of the Day, the price of gold is not only up 3.8% since the start of the year, but just broke out to its highest level since June 2021 on Thursday. So is this move for real, and will gold continue to benefit investors’ portfolios?
“Gold has been a frustrating trade over the past year or so,” said LPL Financial Technical Market Strategist Scott Brown. “But we think the most recent breakout has a strong chance of turning into a more durable rally because of the steady base that has been built over the past six months.”
Going forward, we see the November highs near $1,875/oz. as important support to hold following the breakout, but believe it isn’t unreasonable to expect the yellow metal to test its all-time highs near $2,000/oz. at some point in 2022. Certainly gold has benefited not just from the poor returns in equities and fixed income, but also headlines about a possible Russian invasion of Ukraine. However, it has also powered through a dramatic rise in real (inflation adjusted) interest rates since the start of the year, something many investors expected to be a headwind as the market looks ahead to the Federal Reserve raising interest rates. While trading off headlines is never recommended, we believe the trend in gold and commodities more broadly suggests it may deserve a position in suitable investors’ tactical portfolios.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
All index and market data from FactSet and MarketWatch.
This Research material was prepared by LPL Financial, LLC.
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
- Not Insured by FDIC/NCUA or Any Other Government Agency
- Not Bank/Credit Union Guaranteed
- Not Bank/Credit Union Deposits or Obligations
- May Lose Value
For Public Use – Tracking # 1-05246682