Why the inflation drop is good news for new gold investors
Inflation is continuing its descent. That was one of the big economic takeaways on Thursday when the latest inflation reading from the Bureau of Labor Statistics, this time for March, showed the inflation rate dropping more than anticipated. Down to just 2.4%, the rate fell from February's 2.8% and has now dropped two months in a row. It's also very close to the Federal Reserve's aimed-for 2% goal, meaning that additional interest rate cuts could soon be back in play, perhaps as soon as when the bank meets again this May.
While an inflation drop's impact is usually relatively easy to measure for borrowers (borrowing rates are likely to decline) and savers (returns on certificate of deposit and high-yield savings accounts could soon dwindle further), it's not always so clear when it comes to specific investment classes. Gold, for example, has been a popular choice in recent years for its ability to hedge against inflation impacts and diversify portfolios otherwise too volatile for the market.
But that doesn't mean gold won't benefit from Thursday's news, too. The inflation drop is actually good news for new gold investors, in particular. Below, we'll explain why.
Start protecting your portfolio with gold here now.
Why the inflation drop is good news for new gold investors
While not a formal rule, the relationship between gold — and the price of gold specifically — and inflation is clear. When inflation rises, gold's price tends to rise alongside it. This has been demonstrated numerous times in history but perhaps most clearly in the economic landscape of recent years. As inflation rose to a decades-high in June 2022, the price of gold rose, too. And even though inflation dropped from that high, it's taken almost three full years to get as low as it is now.
The recent up-and-down inflationary climate, however, caused the price of the yellow metal to surge to numerous price records, the most recent two coming in the last month when the price of gold surpassed $3,000 and $3,100 per ounce, respectively. That's because investors tend to rush toward gold to help buffer the erosion of the dollar when inflation is high. During periods like these, gold tends to maintain its value and can even rise in price, as it has from 2022 through 2025 (remember, it was priced at just $2,063.73 per ounce in early 2024).
So why is the inflation drop good news for new gold investors, then? That's because the price of the metal is likely to decline now that inflation is moving down again. This is a major advantage that those investors who haven't yet got started with gold should exploit right away. At $3,000 per ounce, approximately, gold was likely out of reach for many new investors. But what if it declines in the days and weeks to come? There may be a rare opportunity to buy in at a lower point and, from there, potentially turn a quick profit or even gain a more valuable edge in your portfolio than you otherwise would have secured by exploring alternative assets.
On the other hand, any drop in price for existing gold investors will obviously not be as welcome, even if it's temporary. But the important thing to remember here is that, historically, it will almost assuredly be temporary. Overall, the price of gold, minus a few drops here and there (likely to occur this week and next), rises upward. So the opportunity to buy in now should be approached both strategically and with relative speed while existing investors can take comfort knowing that the gold they bought earlier this year or in recent years is likely to weather this current economic change well before rising, yet again, in price.
Get invested in gold now before the price rises again.
The bottom line
An inflation drop isn't just good news for borrowers and the overall economy. It could also be good news for investors considering select assets to add to their portfolio. After all, a drop in inflation could cause today's high gold price to decline as well, opening up a small but important window of opportunity to get invested in the precious metal before the price reverses course and increases yet again. So consider using this time to explore your gold investing options. Speak to a financial advisor or gold company who can also help and remember that, even with the price likely to fall in the coming days, gold should typically be limited to a maximum of 10% of your overall portfolio to avoid crowding out other, reliable-income producing assets at the same time.
Learn more about investing in gold here now.
