Gold’s on the Rise: How the Precious Metal is Tied to Our Economy

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So far this year, gold has had its biggest beginning of the year rally since 1980. The 7-month high just touched $1257 per ounce at the beginning of the week. Bullion has climbed 19 percent this year, making it the best-performing commodity. The outlook for U.S. interest rates to stay low has boosted gold’s appeal because it doesn’t pay interest like some other assets, so investors are piling into funds backed by the metal at the fastest pace in seven years.

U.S. gold for April delivery was up 5.22 percent at $1,256.90 an ounce, its highest level since Feb. 6, 2015 when gold traded as high as $1,269.00 an ounce. Spot gold jumped 4.9 percent to $1,256.11 an ounce.

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To most experts, gold prices and the economy seem to be inextricably tangled together. Mostly in just the way that gold is the go-to for stability for some investors, especially in times of uncertainty. Traders said fears of financial instability were fueled by European bank shares slumping to multi-year lows, with concerns mounting over banks’ profitability in a low-growth and low-interest rate environment.

There’s good reason for gold’s rally; some investors are concerned that central banks’ solution is negative interest rates or at least not raising rates—and that is gold friendly. The benchmark 10-year U.S. Treasury yield fell to lows last seen at the end of 2012 when the Fed was busily printing money as investors piled into assets used to hedge against economic and financial uncertainty.Because gold does not pay interest, the fall in returns from U.S. bonds is seen as positive for the metal.

While this market turmoil might not mean a lot to the average American, or the average investor, it is the right time to be thinking about what gold, and other precious metals can do for your retirement fund, and your portfolio.

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