The U.S. job market is showing signs of slowing down as indicated by the Treasury Department’s Tuesday morning's Job Openings and Labor Turnover Survey (JOLT) report. According to the report, job openings in February dropped by 630,000 to 9.9 million from 10.56 million in January.
This decline in the job market seemed to trigger a ripple effect across various appendages of the global economy. The U.S.D. weakened further against a basket of other currencies and treasury prices inched higher. Amidst this economic turmoil, gold, silver, and platinum have surged, recording some of their best days this year.
Investors sensing the volatility in high risk assets are turning to precious metals like gold, silver, and platinum as safe-haven assets to hedge and diversify. The price of gold, silver and even platinum all saw impressive gains Tuesday. Gold broke above $2,000 again, a major resistance level for the metal, and may be poised to break its all time high (not accounting for inflation) of about $2,074.88 in the near future if the economy continues in this direction.
Precious metals have always been a popular choice for investors seeking to protect their wealth in times of economic upheaval, especially when you exclude the 40 year period when it was illegal to hoard gold in the U.S. With the current pressures on the economy, such as the war in Ukraine, inflation, high interest rates, a weakening dollar and the recent banking crisis, these assets are becoming even more attractive. As the job market continues to slow, investors are increasingly searching for financial refuges, driving up the value of gold, silver, and platinum.
Gold, in particular, has long been regarded as a hedge against inflation too, making it even more popular in times of high inflation. It isn’t consistently the best inflation hedge because its price isn’t always directly correlated with consumer prices but it’s still one of the most popular. For example, it was a fantastic hedge in the 70s and a poor one in the 80s. As oil prices helped drive inflation to 8.8% from 1973 to 1979, gold returned 35% annually. While high inflation continued from 1980 through 1984, gold fell 10% each year on average, losing out to other hedges like real estate. Even though it isn’t always the best hedge in hindsight, it’s still one of the most popular
As economic conditions worsen, investors typically flock to gold as a means of preserving their capital. Silver and platinum have similarly enjoyed an increased demand as investors search for alternatives to the volatile stock market and depreciating currency values. Each precious metal provides unique exposure to different economic factors and conditions.
It’s impossible to perfectly forecast the trajectory of the global economy but the one thing that is certain is today’s uncertainty.There are too many unpredictable variables at play. However, if the economy continues to be held down by factors such as the slowing job market, high interest rates and a faltering dollar, investors may continue to escape risk assets and instead pile into precious metals.
Investors are turning to gold and silver in droves to protect their portfolios as uncertainty rises in the economy. Check out Benzinga’s Precious Metals Hub to master the sector and discover the best precious metals trading platforms.
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