Will Rising Interest Rates Send Gold Back to Its Highs?
Key Points
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The Fed raised interest rates last week, for the first time in multiple years.
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Economic and political uncertainty could lead to investors loading up on safe-haven assets such as gold.
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High stock valuations may also give investors an additional reason to seek safety right now.
Gold has been rising in value in recent months, currently trading at around $4,300 per ounce. It’s nowhere near the level of more than $5,000 that it reached early on in the year, but with the Fed recently raising interest rates and plenty of uncertainty in the markets this year, it could rally again.
For investors looking to gain exposure to the precious metal, the SPDR Gold Shares (NYSEMKT:GLD) fund has been an excellent option, as it tracks the spot price. It can be a highly effective way to benefit from the precious metal’s rise in value. Is it a good buy right now, and can gold get back to its previous highs before 2026 comes to a close?
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The last time the Fed began raising interest rates, the price of gold fell
In early 2022, when inflation was a big problem for the markets, the Fed began hiking interest rates aggressively to bring it under control. As that happened, the price of gold would go on to fall. It would end up finishing the year flat, which was still a much better performance than the broader markets, as the S&P 500 declined by 19%.
That, however, was also at a time when inflation was at levels it hadn’t been at in decades, which is a different situation than now, where the war in Iran is having an adverse impact on oil prices, which is having a ripple effect on the economy.
One reason investors may pivot toward gold in the latter part of 2026, however, may be due to political uncertainty. Not only are midterm elections coming up in November, but if the Fed raises interest rates again, there’s the potential for renewed conflict between the Fed Chair and U.S. president, who has been advocating for lower rates. All this uncertainty may have investors in search of safety, particularly at a time when stock valuations are high.
Why buying the SPDR Gold Shares fund could be a great move right now
There are multiple reasons investors may want to consider adding safe-haven assets these days. Political and geopolitical uncertainty, combined with high stock valuations, could make the overall market vulnerable to a correction in the near future, possibly sending gold higher in the process.
While a crash might not happen this year, and I don’t think gold will get back to its highs anytime soon, investing in the SPDR Gold Shares fund can help investors reduce their overall risk. Although rising interest rates alone might not lead to higher gold prices, they could very well contribute to them.
Should you buy stock in SPDR Gold Shares right now?
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
