With government spending running wild and inflation stubbornly high, investors should consider dialing back their bond exposure in favor of gold using exchange traded funds.
"You need to hedge yourself against inflation in your portfolio, and I think gold, whether it’s the GLD or if you want to buy some gold equities, I’d offer GDX as a proxy for that. They're great ways to insulate yourself from what’s going on in the bond market," George Noble, Noble Capital Advisors managing partner, said during an appearance on "Making Money with Charles Payne."
"We’re (the U.S.) spending money like drunken sailors, and I have a real concern: Who's going to buy these bonds at a certain point?"
The U.S. national debt is closing in on $35 trillion amid a boost in spending programs by Congress and the White House.
NATIONAL DEBT TRACKER: FOXBUSINESS
The SPDR Gold Shares, also known as GLD, is the world’s largest gold fund backed by physical gold and has risen 10.8% this year.
Whereas VanEck’s Gold Miners ETF, which invests in gold mining stocks such as Newmont Mining, AnglGold and Royal Gold, has gained 7% this year.
Gold prices hit a record $2,431.55 in April before pulling back slightly. For the year, the yellow metal has gained over 15%, outpacing the S&P 500’s 5.6% rise through Tuesday. The yield on the 10-year Treasury rose to 4.683%, registering the largest monthly gain since September 2022, as tracked by Dow Jones Market Data Group. Bond yields trade inversely to prices.
INFLATION RUNS HOTTER-THAN-EXPECTED IN MARCH
Inflation, which has come down from its peak of 9.1%, is still running above the 2% target policymakers were hoping for. The latest consumer price index for March rose 3.5% annually, which was more than economists had expected. Americans are paying even more for everyday items.
For example, ground beef prices jumped over 6%, while baby food rose 9.9% and rents soared nearly 6%, compared to a year ago in March.
JAMIE DIMON WARNS INFLATION, INTEREST RATES MAY REMAIN ELEVATED
There is a growing chorus predicting inflation won't be that easy to bring down. JPMorgan CEO Jamie Dimon flagged the issue in his widely read annual letter.
"It is important to note that the economy is being fueled by large amounts of government deficit spending and past stimulus," Dimon wrote. "There is also a growing need for increased spending as we continue transitioning to a greener economy, restructuring global supply chains, boosting military expenditures and battling rising health care costs.
"This may lead to stickier inflation and higher rates than markets expect."
The Federal Reserve’s decision on interest rates, due Wednesday, will set the tone for perhaps more upside for gold. When the year began, the Fed was predicting at least three rate cuts, but now market expectations have dwindled.
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The CME’s FedWatch Tool, which tracks probabilities for rate moves, is not forecasting any cuts through September with the chances of one in November, an election month, too close to call, which would leave the Federal Funds rate at 5.25%-5.50%.
FOX Business' Megan Henney contributed to this report.
