The precious metal recovered from back-to-back losses on Tuesday, with gold prices closing marginally higher.
The consumer price index’s May update will be a significant focus for investors as they prepare for the second half of the year.
With few options for investors to hide as equities, bonds, and most other financial assets have fallen sharply in value in 2022, gold is being promoted as a diversification tool that can help protect investors from high inflation in the second half of the year.
In their midyear view, a team led by Michael Arone, chief investment strategist at State Street Global Advisors, stated, “Year-to-date, gold has beaten the S&P 500 index SPX, 0.57 percent by 14.17 percent, highlighting its capacity to guard against equities market pullbacks.”
With the expectation that volatility will stay high in the second half of the year as the Federal Reserve tightens financial conditions to rein in inflation, they advise investors to focus on company fundamentals, restrict duration, and examine inflation-sensitive alternatives, such as gold.
Following the yellow metal’s recent climb toward $1,800 per ounce, Kitco analysts attributed gold’s small advances Wednesday to “bargain hunting.” They also noted the move as a result of lower U.S. stock prices and persistent inflation concerns.
Naeem Aslam of Avatrade said that precious metals trading was generally unimpressive ahead of the United States’ May inflation report, which is due Friday.
“The most important denominator for price action remains the US inflation number, which isn’t expected until Friday,” he said.