Money123: Your jewelry box might’ve just gone up in value

A golden opportunity?

Gold prices hitting an all-time high earlier this week has many investors taking a closer look at what getting a bit of bullion could do for their portfolios.

Experts who spoke to Global News say gold has been riding on a wave of uncertainty in recent months, with geopolitical instability compounding with a weaker U.S. dollar to push the precious metal’s price higher.

Gold is benefiting from the same forces that have been lifting bitcoin and other cryptocurrencies higher as of late as investors look for a new safe haven on the markets as the U.S. dollar falters, investment advisor Allan Small says.

“I don’t think it’s any coincidence that you’re seeing crypto and gold … moving higher as the U.S. dollar struggles under the weight of perhaps a lower interest rate environment to come in 2024,” he tells Global News.

There are many ways individual investors can get exposure to gold, be it in a certificate, an exchange-traded fund or owning a physical gold bar.

Some experts are wary of gold’s value as anything more than a “speculative” investment, while others say the commodity has a place alongside other real assets in a portfolio.

Read more to see if you should join in for a modern gold rush.

Rate cut chatter getting louder

The Bank of Canada opted to hold its benchmark interest rate steady at five per cent for the third consecutive decision on Wednesday, but continued to warn that rates could rise higher still.

Some economists are calling the central bank’s bluff on that, however, arguing that it’s clear monetary policy is tight enough to get inflation back down to the two per cent target.

“At this point, it does look like the next move will probably be lower for (the Bank of) Canada, not higher,” says Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO.

Derek Holt, chief economist at Scotiabank, said this week that the Bank of Canada is largely forced to keep its tightening bias to avoid a flood of rate cut bets in financial markets that could end up undoing some of the tightening to date.

Toni Gravelle, a deputy governor at the central bank. pushed back on those narratives to reporters on Thursday, arguing inflation was not on a “sustainable path” back to two per cent. While inflation came in at 3.1 per cent in October, he said that “one month is not a trend,” and past “volatility” in readings is keeping the Bank of Canada cautious.

Big bank economists are nonetheless plotting out when the Bank of Canada might feel confident enough to drop its policy rate. Read more here on when rate cuts might begin.

Better news for food inflation in 2024

Shoppers shouldn’t be expecting grocery prices to drop come 2024, but the latest Food Price Report from Canadian agri-food researchers should hit households a bit softer than this past year.

The report released Thursday estimates food prices will increase by 2.5 to 4.5 per cent over the next year, which is down from the five to seven per cent forecast a year prior.

“That doesn’t mean that everything is going to be cheaper than it was before. It absolutely is not,” Janet Music, one of the authors of the report, said in an interview with Global News. “But it’s not going to be as expensive if things were going to keep going as they were.”

For the average family, the estimated increase in food prices next year will add roughly $700 to their grocery bills compared with 2023, the report said.

While some food groups like dairy and fruit are expected to see costs rise below the overall average, some categories could see prices continue to rise to a greater degree.

Read more to find out which aisles of the grocery store are expected to feel the pinch of inflation in 2024.

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– THE QUESTION –

“I have $50,000 in mutual funds that haven’t had much return in the last few years since I opened. Now that GIC rates are higher (three to five per cent depending on term from my institution) what are the pros/cons to switching some or all of the mutual funds to GICs? The mutual funds are currently housed in my RRSP/TFSA. I’m early in my career and most of this money won’t be needed until retirement, so locking it in isn’t a concern.”

— A Money123 reader 

“Stocks and bonds have both been flat the past couple years. The TSX has returned about five per cent, the S&P 500 has returned about 10 per cent, and the FTSE Canada Universe Bond Index has lost about eight per cent for the two-year period ending Nov. 30. Most balanced investors are in a similar position to late 2021 as a result. If your investing experience has only included the past couple years, I understand your disappointment.

Stocks and bonds generally go up. They also go down and 2022 was a rare year where both fell. The longer your time horizon, the better it is to hold stocks, though. Ten-year returns for the TSX were over seven per cent annualized and for the S&P 500 were almost 14 per cent annualized as of Nov. 30.

GIC rates are high for now. Rates from non-bank issuers have topped six per cent. However, those same rates are unlikely to be available upon renewal. As a result, GICs are probably not the best option for a young long-term investor to save for retirement.

One consideration is whether you might use some of your TFSA or RRSP savings for a home purchase. If so, I’d be more inclined to consider safer investments. Otherwise, if this money is for retirement in 30 years, stocks are likely to be the best option for the long term, even if they can be volatile from year to year or provide little to no return for a couple years at a time.”

–  Jason Heath, managing director, Objective Financial Partners

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