The rare yellow metal gold has started gaining momentum in recent weeks, as inflation continues to ravage the economy. Companies that rely on producing the commodity automatically become more attractive investments to buy and hold during inflationary environments due to increased profit margins.
Gold has long been seen as one of the best ways to hedge against inflationary environments and market volatility. Gold prices tend to rise in the long term, and their movement is typically opposite to broader equity securities.
Barrick Gold is one of the top gold stocks in Canada, boasting extensive operations worldwide. Let’s take a closer look at the situation right now and whether it warrants adding Barrick Gold stock to your investment portfolio.
Recession and inflation fears
Inflation rates have been soaring to unnerving levels worldwide since 2021. Pumping liquidity into the economy was a tactic critical to ensuring a degree of stability amid the pandemic. Combined with historically low interest rates, it also resulted in inflation reaching new heights.
Central banks like the Bank of Canada (BoC) and the U.S. Federal Reserve started enacting interest rate hikes to bring record inflation levels under control.
Unfortunately, raising interest rates does not immediately cool down inflationary environments. Until higher interest rates manage to bring inflation under control, economic growth comes under great pressure. Investors are increasingly worried about a recession, as inflation and higher interest rates continue to make lives difficult for everyone.
All the uncertainty created by macroeconomic factors has created the perfect environment for gold prices to rise.