Gold Shines as a Haven in 2022

7.21.22 - Jobless claims rise to highest level since November

Gold last traded at $1,714 an ounce. Silver at $18.75 an ounce.

News Summary: Precious metal prices jumped Thursday on U.S. dollar weakness as ECB raised interest rates. Stocks retreated on weak earnings and recession concerns.

Morningstar--"So far, 2022 is turning out to be an unusually painful year for investors. Stocks lost more than 20% during the first half of the year, with even deeper losses for the growth-oriented tech stocks that previously led the market. At the same time, the Fed's initial steps toward hiking interest rates-along with expectations for future interest-rate hikes-dented bond valuations. As a result, bonds have posted some of their worst returns in decades, with the Morningstar US Core Bond Index losing about 10% for the first six months of the year.

Gold, along with commodities and cash, was one of the few places where investors could take shelter. Gold has mostly stayed in a trading range in recent months (priced at about $1,737 per ounce as of this writing), but still ranks as one of the better-performing asset classes in this year's market rout...

Gold has a long history as a safe haven. The price of gold is largely independent of other asset classes, and it has also traditionally been used as a refuge against weakness in the U.S. dollar. It can also serve as a hedge against inflation and market volatility.

There are two primary ways to invest in gold: buying the commodity directly (gold bullion) or buying shares in companies that mine and sell gold (gold equity). Because gold stocks have both financial and operating leverage, their results tend to magnify the impact of changes in the price of gold. They're also significantly more volatile than bullion, which only depends on the underlying commodity price. In this article, I'll focus on gold bullion, which is a better fit for investors seeking a hedge against market-related risk.

As mentioned above, gold has lived up to its reputation as a buffer asset in this year's market drawdown. As shown in the chart below, the price of gold is down slightly so far this year (as of July 11, 2022), but it still has provided a cushion against much deeper losses in stocks."