Why gold has become a good investment in 2023 (2024)

This year has already been financially rocky for many Americans plagued by rising prices, high interest rates and a bumpy stock market. And that's not to mention the effects on people's jobs and incomes, amid recession concernsand layoffs.

As the uncertainty continues, gold could make a sound investment option for some investors today looking for stability and a way to diversify.

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Why gold has become a good investment in 2023

Here are three reasons why gold may be more appealing to some investors this year.

Inflation is high

If you've been to a grocery store or on a vacation in the past year, you've probably been affected by today's inflation.

Though prices today may not be as inflated as they were a few months ago — thanks to ongoing federal interest rate hikes from the Federal Reserve designed to bring down inflation — they're still high. The latest Consumer Price Index cited shelter, airline fares, household furnishings and new vehicles as areas where prices are still increasing, among others.

When inflation runs high, that means that the value of the U.S. dollar has gone down; each dollar you have has less purchasing power than it did before. Historically, the price of gold tends to rise when the dollar falls, making today's still-inflated prices a potential reason to consider gold while prices adjust.

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Recession concerns

Many are still concerned about the possibility of an extended recession.

In fact, even Federal Reserve representatives have raised concerns about the likelihood. Specifically citing the fallout of failures in the banking sector earlier this year, "the staff's projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years," the staff economic outlook section of the FOMC's latest meeting minutes in March revealed.

If a recession causes ripple effects throughout the stock market, diversifying your portfolio with gold could be a way to add some security. Gold can help mitigate the effects of a market downturn because its price tends to move independently of stock prices. When the stock market is down, the price of gold often holds steady.

While this doesn't mean you should invest all your money in gold, adding a small allocation (up to about 5%) to your portfolio may help you weather the storm.

Gold prices are rising

Both of the factors above have led to one big reason interest in gold is growing.

Over the past few months, the value of gold has seen a big increase. In fact, just a few weeks ago it nearly topped its all-time high and spent several days above the $2,000 price point it hasn't reached since breaking that record.

Some experts say today's high gold prices will continue rising as inflation persists and the economy remains uncertain. For investors looking to take advantage of the ability to diversify with an asset like gold (which may perform well while others in their portfolio fall) now could be a good time.

The bottom line

What the future holds for economic conditions and inflated prices is still uncertain, but gold has caught the interest of some this year as a safe haven. Because it's seen as a hedge against inflation and a way to diversify other assets in your portfolio, it can be appealing for some during periods of uncertainty.

If you're considering adding gold to your portfolio, consider speaking with a trusted financial expert who can help you decide the best options for you and learn more with a free investor kit today.