The latest inflation report, released this week, shows that while the inflation rate is down year-over-year, we aren’t back to normal just yet. The inflation rate grew 3.2% year over year in February, according to the report, and was driven largely by increasing home and gas prices. That rate is slightly higher than what occurred in January — and is still well above the 2% target rate set by the Fed.

What that means is that many people’s budgets are still being stretched by higher prices on consumer goods, from groceries to gasoline. And that, coupled with the other economic pressures we’re facing, like high borrowing costs, can be challenging for your finances. 

While it’s important to keep money in savings for emergencies and make investments to build up a comfortable retirement nest egg, it’s also important to ensure that your money’s growth is outpacing inflation. Otherwise, you’re effectively losing buying power. 

So, how can you protect your money as inflation remains persistent? Gold could be a compelling option. 

Invest in gold to diversify your portfolio now. 

3 reasons to buy gold now that inflation is up again

As inflation continues to impact the economy, gold could be an attractive asset to consider. Here’s why: 

Gold’s price typically rises with inflation

When inflation heads up, the price of gold tends to follow — and vice versa. That’s because while the value of the dollar declines during periods of high inflation, and paper money loses buying power, investors turn to gold for its inflation-hedging properties. 

In turn, the price of gold is driven up further by the increased demand, helping to protect the value of their investments.

“At the end of the day, gold is a commodity, and commodities serve as a hedge against inflation and most types of uncertainty because it’s always in demand,” says Matt Willer, managing director and partner at Phoenix Capital Group. 

And, considering that the February inflation report shows that inflation remains persistent, gold could be a smart bet right now. According to the report, consumer prices increased by 0.4% from January to February — and were up by 3.2% compared to February 2023. 

Hedge against stubborn inflation with a gold investment today. 

Gold can protect you from other market-related losses

Gold isn’t just a safe haven in terms of inflation protection; it can protect your portfolio from other risks, too. For example: 

• Stock market risk: When conditions in the stock market are uncertain, investors often look to gold as a way to safeguard the values of their portfolios. During market downturns, an uptick in gold demand tends to push the price of the precious metal higher. 
• Economic uncertainty: Investors, consumers and even central banks often turn to gold during periods of economic uncertainty, which, in turn, can cause the price of gold to head upward during these times. 
• Geopolitical tensions: Geopolitical tensions tend to be bad for financial markets, so when geopolitical tensions increase, investors tend to look to gold as a way to add stability to their portfolios. This, in turn, can lead to further increases in the demand for gold — causing an uptick in gold’s value.    

Gold is an effective way to diversify your portfolio

Unlike paper currency, there is a finite supply of gold. And, because of the limited supply, gold’s price generally changes based on changes in the demand for the precious metal. So, it’s not typically susceptible to the ebbs and flows of the market like traditional investment assets are. As a result, you can use the commodity as a diversification tool, potentially protecting against losses from other types of investments. 

The bottom line

Inflation remains high, despite the Federal Reserve’s efforts to combat it. While that means you’re paying more at the pump and the grocery store, it could also be an opportunity for investors to benefit from a gold investment. After all, as inflation rises, the value of gold tends to follow. And, with two consecutive months of higher-than-expected inflation, now may be the time to add gold to your investment portfolio. By doing so, you can help to protect your portfolio from inflation and other market risks, like economic and geopolitical uncertainty.  

Joshua Rodriguez

Joshua Rodriguez is a personal finance and investing writer with a passion for his craft. When he’s not working, he enjoys time with his wife, two kids, three dogs and 6 ducks.