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May 2023 Newsletter: Alternative Asset Markets Strong and Steady in April—Fed Meeting Could Rally Gold
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Last Updated on: 2nd May 2023, 04:33 pm
Market Snapshot: May 1, 2023
- Inflation Rate: 5.0%
- Fed Rate: 4.75% to 5.00%
- Gold Price: US$1,992/oz.
- Silver Price: US$25.42/oz.
- Bitcoin Price: US$28,526
- Ethereum Price: US$1,845
The past few years have been anything but stable for the economy. Perhaps the spring season’s slow and boring stability, then, comes as welcome news for alternative investors.
Although we were spared any major rallies in the market, slow and steady growth appears to be emerging in diverse sectors.
Throughout April, gold prices ended the month where they began (in the upper US$1,900s) and Bitcoin held strong above the US$28,000 mark. Let’s take a glance at the 30-day price movements that we saw across the alternative assets sector in April:
The largest 30-day price movement in April was for platinum bullion, which saw over six percent growth, followed by silver at over four-and-a-half percent. Gold and palladium prices held more or less constant over the same period.
After peaking over the elusive US$2,000-per-ounce mark before the end of the month, the price of gold dipped slightly by May 1st. This comes amid a strong showing for the U.S. dollar, a currency that has held strong as economists anticipate the next Fed rate-hike decision due later this week.
Monetary Policy the Key Variable
A pivot in monetary policy from the Federal Reserve (such as a rate cut or hold) would likely send gold and other non-yielding assets to new heights. However, as for now, market watchers are anticipating a 25 basis-point hike this week before a rate cool-off later in the year.
When rate cuts are eventually enacted, we should see bullish activity in the gold market. This is because, historically speaking, cuts in interest rates improve the attractiveness of assets that do not pay interest—such as precious metals and commodities.
The inverse is that a more hawkish rate hike may lead to negative price movement for gold. Should a 50 basis-point hike take place this week, it is more likely that gold prices will dive back below US$1,900, where the asset was trading before March’s Federal Open Market Committee (FOMC) meeting.
Suffice it to say, the price of gold largely depends on what central bankers will decide to do in the days ahead. For those willing to bet on a 25 basis-point hike (or lesser), taking a long position in gold may be a good idea at current prices; for those expecting a more hawkish decision, a short position may be a better bet.
Hedge Your Bets With Portfolio Diversification
More risk-averse investors may want to steer clear of gold in the meantime. Instead, diversifying your investment portfolio with various non-correlated assets and risk mitigation hedges—such as silver, platinum, palladium, index funds, and even cryptocurrencies—can provide peace of mind during periods of economic uncertainty.
To diversify your portfolio, consider opening an account with one of our top-ranked precious metals IRA companies. These fully insured service providers can help you launch a self-directed retirement investment account—with all the tax advantages of your regular IRA or 401(k)—while providing the financial freedom to invest in alternative assets unavailable to brokerage accounts.