Terrified investors are clutching their gold as the ultimate safety blanket
NEW YORK (February 7) Investors who view the Federal Reserve’s hesitant stance on cutting interest rates this year as a reason to avoid investing in gold are focusing on the wrong drivers of the precious metal, according to one market strategist.
Historically, gold has been sensitive to U.S. monetary policy, as higher interest rates increase gold’s opportunity cost as a non-yielding asset. At the same time, higher rates also support the U.S. dollar, creating a second headwind for gold. However, in a recent interview with Kitco News, Kathy Kriskey, Commodity Strategist at Invesco, said investors should be paying attention to a new factor driving gold prices.
Kriskey explained that investors are turning to gold to protect themselves from ongoing geopolitical and global economic uncertainty. She pointed out that this sentiment is not new, as many older investors have long viewed gold as a way to safeguard their wealth. However, she noted that what is surprising is that many newer investors are also starting to take notice of gold as market volatility increases.
“If you're an investor and something is terrifying you, and you want to hide under your bed, you need to have gold in your portfolio,” she said. “Gold is the ultimate safety blanket.”
Kriskey said volatility in the equity market is prompting investors to reassess the health of their portfolios. She noted that disruptions in the tech sector are leading many to question equity market valuations.
Gold’s recent rally to consecutive daily record highs has pushed prices up more than 8% so far in 2025. Meanwhile, U.S. equities are up only 2.8%, and even the U.S. dollar has posted losses this year.
When asked why gold is an attractive safe haven, Kriskey pointed to the key buyers in the market: central banks seeking to diversify away from the U.S. dollar.
She cited China’s central bank as a prime example. The People’s Bank of China bought gold for 18 consecutive months, then halted purchases in mid-2024 for six months, only to re-enter the market at the end of the year.
“China's reserves are only five percent in gold, so that gives me a lot of hope that China will continue to buy, especially with these battles with Trump. They need to de-dollarize,” she said. “So China, especially, but other central banks too, are providing an important floor for gold.”
According to the World Gold Council, central banks purchased 1,045 tonnes of gold last year, marking the third consecutive year they have bought more than 1,000 tonnes.
Although gold is an attractive safe-haven asset, Kriskey noted that it has its limits. She does not see gold as a strong inflation hedge. Instead, she advised that investors looking to protect themselves from economic instability and inflation should invest in a broad commodity basket that is overweight in gold.
“I love gold. I lead with it—it is one of my favorite commodities. But I didn’t love gold in ‘21 and ‘22 because it wasn't a good hedge against inflation,” she said. “I think gold will be the leader this year. But as a hedge against inflation, I would create a broad-based basket covering three sectors: energy, metals, and agriculture.”
Kriskey’s final piece of advice for investors is to avoid chasing gold and other commodities, like coffee, at their record highs.
“There is a place in your portfolio for broad-based commodities for a number of reasons, but wait for the dip, be disciplined, and layer in as commodities experience their small pullbacks,” she said.
KitcoNews
