After a lackluster start to the year, the price of gold staged a significant rally during the month of May. In early March, the spot price of gold registered around $1,680 per ounce, a 19 percent decline from the August 2020 record high of $2,070. As of the end of May, however, gold had rebounded to more than $1,900 per ounce.
The precious metal’s latest surge has been fueled by continued low interest rates and indications of mounting inflationary pressures. With the Federal Reserve’s vow to keep interest rates low for the next few years, inflation will erode real interest rates, and when real rates turn negative, investors can turn to gold as a store of value.
The U.S. personal consumption expenditure inflation index climbed to 3.6 percent in April from a year earlier, marking the strongest reading since 2008 and putting inflation well above the Fed’s 2 percent goal. Investors will need to keep an eye on inflation, as well as the Fed’s response, in addition to
