For the first time in history, the price of gold rose above $2,200 per ounce in this latest rally. Gold prices have set new historic highs four times in the last three months. What has caused this rally, and how does it benefit the owners of gold IRAs? Well, the current rally started after the October 2023 inflation report. With inflation under better control, the Federal Reserve started making stronger statements about reducing interest rates in 2024. Lower interest rates mean falling demand for U.S. government debt and therefore falling demand for the U.S. dollar. A weaker dollar lifts gold prices because it takes more dollars to buy the same amount of gold. And because gold is priced in U.S. dollars, a weaker dollar increases gold demand overseas.
U.S. mint gold bullion coin sales have predictably slowed down. And gold sales have dramatically increased in China, which is one of the two largest buyers in the world. But Chinese investors are not buying gold only because of a weaker dollar. Chinese investors are worried about the future of the Chinese economy, which has slowed down with no end in sight. So to protect their wealth, Chinese investors are plowing more of their money into gold. Gold has always been an important diversification strategy among native Chinese, who've seen multiple revolutions and world wars destroy financial systems and require a wealth that is portable and recognized as a form of money worldwide. Add to that record gold buying by central banks all over the world. Gold supplies being stretched to its limits from increasing demand.
So how does this impact your retirement portfolio? Well, to state the obvious, if you own gold in your retirement portfolio, chances are your portfolio did nicely over the last quarter. But most people saving for their retirement hold exclusively stocks, bonds and cash, which did not perform as well as gold during this rally. Well, short term gains are one thing, but retirement income is all about the long game. And it is hard to predict what will happen before you retire and need to take distributions from your retirement income.
That is why it's a good reason to diversify your retirement savings with gold. If your portfolio is made up of stocks, bonds and cash, gold is called an alternative asset. Because when stocks, bonds and cash go down, gold usually goes up. Like right now. But when stocks, bonds and cash go up, gold usually goes up, but not by as much. So gold can function as wealth insurance for those thinking about protecting their retirement from the uncertainty of what may happen in the future. One of the easiest ways to diversify your retirement with gold is with a gold IRA. Mine is from U.S. Money Reserve.
