Expectations for a continued fall in gold prices are rising in light of the tendencies of central banks around the world to increase the interest rate. A recession would favor gold prices, but the sharp rise in interest rates used to deal with inflation has so far limited the rise of the precious metal. While gold has fallen 15% since its March peak, after the Federal Reserve began tightening monetary policy, it has risen by about 7% since the beginning of November, as markets began setting prices at a slower rate of rate hikes. The outlook for the price of gold will probably depend on how geopolitical tensions develop and how monetary tightening affects the world economy, among other factors.
And a key index that tracks the performance of gold mining stocks fell to a more than two-year low. However, whether gold is the right investment for you depends on your risk tolerance, market outlook, and whether you expect it to rebound or continue to fall, among other factors. The gold market narrative has been driven by the contrasting effects of persistently high inflation and rising interest rates by central banks in response. Some investors may choose to maintain some exposure to gold in their portfolio to diversify, as a protection against the fall in stocks and bonds.
On a positive note, central banks continue to add gold to their reserves, especially Turkey and Egypt. ETF stocks are expected to continue to fall, but will remain near historically high levels, which will also affect the price of gold. The World Gold Council, the market development organization for the gold industry, recently opined that the commodity will face two key obstacles.