Investors who see the Federal Reserve's hesitant stance on cutting interest rates this year as a reason to avoid investing in gold are focusing on the wrong drivers of the precious metal, according to a market strategist.
Historically, gold has been sensitive to US monetary policy, as higher interest rates increase the opportunity cost of gold as a non-yielding asset. At the same time, higher rates also support the US dollar, creating a second headwind for gold. However, in a recent interview with Kitco News, Kathy Kriskey, commodity strategist at Invesco, said investors should pay attention to a new factor driving gold prices.
Kriskey explained that investors are turning to gold to protect themselves from the current global geopolitical and economic uncertainty. She noted that this sentiment is not new, as many older investors have long viewed gold as a way to safeguard their wealth. However, she pointed out that what is surprising is that many newer investors are also starting to pay attention to gold as market volatility increases.
“If you're an investor and something terrifies you and you want to hide it under your bed, you need to have gold in your portfolio,” he said. ‘Gold is the best protection.’
Kriskey said volatility in the stock market is prompting investors to reevaluate the health of their portfolios. He noted that turmoil in the technology sector is leading many to question stock market valuations.
Gold's recent rise to consecutive daily highs has pushed prices up more than 8% so far in 2025. Meanwhile, US stocks are up only 2.8%, and even the US dollar has posted losses this year.
When asked why gold is an attractive safe haven, Kriskey pointed to key buyers in the market: central banks looking to diversify beyond the US dollar.