Continuous surge in asset prices is causing a frenzy on Wall Street
Investors with a love for gold are rejoicing as their favorite precious metal continues to reach new highs. On Tuesday, gold prices surged to a record-breaking $2,141.90 per ounce as investors bet on the Federal Reserve cutting interest rates in the second half of the year.
Gold is considered one of the most resilient investment assets. As interest rates decline, holding assets like bonds becomes less attractive compared to owning the precious metal. However, some investors also see gold as a hedge against inflation, believing it will retain its value even as prices begin to rise.
It’s not just traders trying to get in on the gold frenzy. Costco, the renowned US retailer, started selling gold bars in September last year and made over $100 million in its first quarter of fiscal year 2024. Gold’s popularity has been increasing during times of global economic uncertainty because it is a tangible asset with less risk compared to stocks.
The Personal Consumption Expenditures Index (PCE), the Federal Reserve’s preferred measure of inflation, rose 2.4% compared to the same period last year in January, according to the latest data from the Department of Commerce. This is a decrease from the 2.6% increase in December.
The core PCE index, which excludes food and energy prices, increased by 0.4% in January. While this increase aligns with expectations, it marked the fastest monthly growth since February 2023.
Currently, traders see a 69% chance of the Federal Reserve cutting interest rates at the June policy meeting, according to the CME FedWatch Tool.
In addition to gold, Bitcoin, often referred to as digital gold, has also experienced recent price surges. On Tuesday, the cryptocurrency surpassed $69,000, breaking the previous record of $68,789 set in November 2021.
Meanwhile, stocks have been on an upward trend this year, although their momentum has slowed down this week. The S&P 500 index has continuously reached new record highs, and the Nasdaq Composite index hit an all-time high last week, fueled by the ongoing boom in artificial intelligence sweeping Wall Street.
Source: Business Today