A market strategist said that some investors see the Fed's hesitant stance on interest rate cuts this year as a reason to avoid investing in gold, and they are focusing on the wrong factors driving up gold prices.

Historically, gold has been sensitive to US monetary policy as rising interest rates increase the opportunity cost of gold as a non yielding asset. At the same time, the rise in interest rates has also supported the US dollar, bringing a second resistance to gold. However, Kathy Kriskey, a commodity strategist at Invesco, recently stated that investors should focus on a new factor driving up gold prices.

Kriskey explained that investors are turning to gold to protect themselves from the ongoing geopolitical and global economic uncertainties. She pointed out that this sentiment is not new, as many older investors have long viewed gold as a way to protect their wealth. But she pointed out that surprisingly, as market volatility intensifies, many new investors are also starting to pay attention to gold.

She said, "If you are an investor and there is something that scares you and you want to hide under the bed, then you need gold in your investment portfolio. Gold is the ultimate safety blanket

Kriskey stated that the volatility of the stock market is prompting investors to reassess the health of their investment portfolios. She pointed out that the turbulence in the technology sector is leading many people to question stock market valuations.

The recent rise in gold prices has hit consecutive daily highs, driving the cumulative increase of gold prices by over 8% so far in 2025. At the same time, the US stock market has only risen by 2.8% this year, and even the US dollar has fallen.

When asked why gold is an attractive safe haven asset, Kriskey pointed out the main buyers in the market: central banks seeking diversification from the US dollar, which are providing an important bottom for gold.

According to data from the World Gold Council (WGC), central banks of various countries purchased 1045 tons of gold last year, marking the third consecutive year of purchasing over 1000 tons of gold.

Although gold is an attractive safe haven asset, Kriskey points out that it also has its limitations. She does not believe that gold is a powerful inflation hedge tool. On the contrary, she suggests that investors who want to protect themselves from economic instability and inflation should invest in a broad basket of commodities that reallocate gold.

She said, "I love gold, I prioritize it, it's one of my favorite commodities. But I didn't like gold in 2021 and 2022 because it's not a good tool for hedging against inflation. I think gold will be the leader this year, but to hedge against inflation, I will create a broad-based basket that covers three industries: energy, metals, and agriculture

Kriskey's final advice to investors is not to chase after other commodities such as gold and coffee when they hit historic highs.

She said, "There are many reasons to invest in broad-based commodities in your investment portfolio, but wait for prices to fall, maintain self-discipline, and enter the market when commodities experience a slight correction.