With inflation remaining high and interest rates elevated, reviewing your investment portfolio this May is more crucial than ever. Gold, which reached its highest investment level in over a decade last year and has been breaking price records recently, presents a unique opportunity. Unlike traditional assets like stocks and bonds, gold operates differently and offers distinct benefits. Considering the current economic conditions, there are several compelling reasons to consider adding gold to your portfolio this month.

Over the last decade, many economists have promoted the use of debt to finance government spending, dismissing concerns about potential debt overhangs as advanced economies enjoyed low interest rates. However, the past two years have seen a significant shift in this perspective due to rising inflation and a return to normal long-term real interest rates. A recent reassessment by senior IMF economists highlights that with average debt-to-income ratios in advanced economies projected to rise to 120% of GDP by 2028 and higher borrowing costs becoming the norm, there is a pressing need for these nations to rebuild fiscal buffers and ensure the sustainability of their debt.

On Wednesday, the Federal Reserve maintained its interest rates, emphasizing the need for "greater confidence" that inflation will consistently approach the 2% target. Despite earlier hopes, inflation in early 2024 has exceeded expectations, leading to predictions that even if the Fed were to cut rates later this year, high interest rates on credit cards and mortgages are likely to persist through the end of 2024. Given the declining APYs on longer-term CDs and some high-yield savings accounts, now is an opportune moment to secure higher savings rates.

Join Alan Hubbard in today’s update on the massive increase in Chinese gold trading activity.