The S&P 500, KOSPI, Nikkei 225, all hit record high last few week, driven by the AI boom. Among major markets, South Korea’s KOSPI has been a standout performer, supported by strong gains in semiconductor stocks that are benefiting from growing AI demand.
At the same time, unemployment remains low and inflation stays above the Federal Reserve’s target rate of 2%. (see image below) Rising oil prices, partly driven by geopolitical tensions in the Middle East, have added inflationary pressure. As a result, investors increasingly expect the Federal Reserve to maintain a hawkish stance and potentially raise interest rates further in the coming quarters.
Gold slumps to a 6-month low amid fears of recession due to the Middle East Conflict and tariff war. With the expectation that interets rates will be raised, money flows into deposits instead, leading to a lower gold price as gold does not generate any income.
AI bubble is on its way?
Some investors argue that stocks are overvalued and a price correction is might be near. One commonly cited measure is the Warren Buffett’s indicator, which compares the total value of the stock market to the size of the economy. According to this metric, stock valuations appear to be high, comparing to the past.
Author and investment strategist Jim Rickards predicted that if this significant one AI company that has financial linkages with many big firms crashes, it will most likely trigger a financial crisis.
Buy Low, Sell High: Is it time to buy Gold?
With stocks appearing overvalued, market crash predictions making headlines, and low gold price, this may be a good time to buy gold.
Personally, I have been pumping up my allocation of gold in my portfolio, via MAE eGold, which is backed by physical gold.
With MAE egold, you can start with as little as 1gram of gold, without the hassle of storing physical gold.
That said, investing decision should always based on individual goals, risk tolerance and investment horizon. MAE egold has a relatively high bank charge (or hair cut), which means investors may need to hold their positions for several months before seeing meaningful returns. Gold can serve as a hedge against uncertainty, but it is not without risks.
What Do You Think?
Do you believe a market crash is coming and the stock market is overvalued? How are you getting yourself prepared in the current environment?
Some say that opportunities emerge during market crashes, and that these periods can be life-changing for investors who are prepared. As Warren Buffett famously said, “Only when the tide goes out do you discover who’s been swimming naked.
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