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Why you should invest in gold before the June Fed meeting

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For many investors, it could make sense to buy gold now before the Fed meets next week.  6vlad@ukr.net/Getty Images

The Federal Reserve is scheduled to meet next week, and the decisions made during that meeting could have a meaningful impact on various aspects of the financial market, from the interest rates being offered on credit cards and loans to returns on deposit accounts and bonds.

And, the results of the Fed meeting can also have an impact on the price of gold. After all, gold is considered a safe-haven asset, and the factors that impact financial markets can also have an impact on gold's price. So, if you're thinking about investing in gold, you may want to make your move before the Fed meets. Here's why.

Compare your gold investing options now

Why you should invest in gold before the June Fed meeting

Here are three reasons you should buy gold before the Fed meeting next week: 

Rates could rise, causing the price of gold to increase

When the Fed meets, one topic of discussion will be the federal funds rate, which serves as the benchmark rate for consumer interest rates. The Fed uses its benchmark rate to keep inflation at, or near, its 2% target. When inflation is too low, the Fed may lower its benchmark rate to spur spending and drive price growth. And, when inflation is too high, it may increase the benchmark interest rate to help curb consumer spending and minimize price growth.

In turn, these benchmark rate changes can have an impact on the price of gold. For example, interest rate hikes often lead to higher demand for gold, driving the price up. That's worth noting because inflation has been persistently higher than the Fed's 2% target over the last couple of years, which is why the federal funds rate is currently paused at a 23-year high

And, while the most recent inflation report indicated that inflation has cooled compared to recent highs, the rate was still 3.4% in April, which is significantly higher than the Fed's target rate. So, a rate hike is one possible outcome of the Fed meeting. 

If the Fed increases its federal funds rate, or if there is concern that a rate hike could happen, the price of gold could increase due to an uptick in demand. So, it may be wise to buy gold before the Fed's June meeting. 

Get started with gold investing here before the Fed meets next week

Gold's price is currently down from record highs

The spot price of gold is currently $2,347.39 per ounce (as of June 7, 2024). That's down by about 4% compared to its recent record high of $2,439.98

And, the price of gold may head back up soon. For starters, not only is the Fed set to meet next week, but other drivers that could push up gold demand are present, too. Inflation is still a cause for concern, and the ongoing geopolitical tensions could also help to drive price growth in the near future. 

So, it could be a smart move to invest in gold now while the price is lower than it was a few weeks ago. That way, you may be able to benefit from any future gains. 

Gold acts as an inflation hedge and diversification tool

Gold also serves as an inflation hedge and diversification tool for many investors, so if you need an asset that can offer these unique benefits, gold may be a good option. 

For starters, gold's price has historically climbed in tandem with the prices of goods and services when inflation is high. So, adding gold to your portfolio could help to offset inflation-related losses from other assets in your portfolio. 

Gold doesn't typically move in tandem with stocks, bonds and other traditional portfolio assets, either. So, adding it to your portfolio could improve your risk-adjusted returns. And, with potential changes to monetary policy just days away, it may be wise to add gold to your portfolio now

The bottom line

Next week's Fed meeting could push the price of gold upward. And, since gold's price is currently down from its recent record high price, buying it now means you could get it at a discount comparatively. Plus, adding gold to your investments could help protect your portfolio by acting as an inflation hedge and diversification tool. Compare your gold investment options now, before the Fed meets next week. 

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