Many precious metals investors are disappointed with gold's performance, especially since gold is widely believed to be a long-term hedge against inflation. The fact is that inflation in the US has grown at a rapid pace this year, peaking at 9.1% in June and falling to 8.5% in July, according to Trading Economics.
However, despite losses this year, gold has outperformed the broader equity market by a significant margin. The SPDR S&P 500 ETF, which tracks the S&P 500 index, fell 14.9% over the same period (excluding dividends). SPDR Gold Shares does not pay dividends. In other words, the losses in the stock market were about three times the losses from owning gold. This was good news.
The bad news for gold investors is that the precious metal's weakness is likely to continue for some time, experts say. “Speaking at Jackson Hole, Fed Chairman Powell reiterated that the Fed's focus is on bringing inflation down, even if it comes at the expense of economic growth,” according to a recent report from consultancy CPM Group. “Expectations of tighter monetary policy are expected to put pressure on the value of the yellow precious metal.”