Investors who see the Federal Reserve's hesitant stance on cutting interest rates this year as a reason to avoid investing in gold are focusing on the wrong drivers of the precious metal, according to a market strategist.

Historically, gold has been sensitive to US monetary policy, as higher interest rates increase the opportunity cost of gold as a non-yielding asset. At the same time, higher rates also support the US dollar, creating a second headwind for gold. However, in a recent interview with Kitco News, Kathy Kriskey, commodity strategist at Invesco, said investors should pay attention to a new factor driving gold prices.

Kriskey explained that investors are turning to gold to protect themselves from the current global geopolitical and economic uncertainty. She noted that this sentiment is not new, as many older investors have long viewed gold as a way to safeguard their wealth. However, she pointed out that what is surprising is that many newer investors are also starting to pay attention to gold as market volatility increases.

“If you're an investor and something terrifies you and you want to hide it under your bed, you need to have gold in your portfolio,” he said. ‘Gold is the best protection.’

Kriskey said volatility in the stock market is prompting investors to reevaluate the health of their portfolios. He noted that turmoil in the technology sector is leading many to question stock market valuations.

Gold's recent rise to consecutive daily highs has pushed prices up more than 8% so far in 2025. Meanwhile, US stocks are up only 2.8%, and even the US dollar has posted losses this year.

When asked why gold is an attractive safe haven, Kriskey pointed to key buyers in the market: central banks looking to diversify beyond the US dollar.

He cited China's central bank as a prime example, which bought gold for 18 consecutive months and then suspended purchases in mid-2024 for six months, only to re-enter the market at the end of the year.

“China's reserves are only five percent in gold, so I am very hopeful that China will continue to buy, especially with these battles with Trump. They need to de-dollarize,” he said. ”Therefore, China, especially, but also other central banks, are providing an important floor for gold.”

According to the World Gold Council, central banks bought 1,045 tons of gold last year, marking the third consecutive year in which they have purchased more than 1,000 tons.

Although gold is an attractive safe-haven asset, Kriskey noted that it has its limits. He does not consider it a good hedge against inflation. Instead, he recommended that investors seeking protection from economic instability and inflation invest in a broad basket of commodities with an overweight in gold.

“I love gold. I use it as a benchmark; it's one of my favorite commodities. But I didn't like gold in 2021 and 2022 because it wasn't a good hedge against inflation,” he said. ”I think gold will be the leader this year. But as a hedge against inflation, I would create a broad basket covering three sectors: energy, metals, and agriculture.”

Kriskey's final advice to investors is to avoid chasing gold and other commodities, such as coffee, when they reach their all-time highs.

“There is a place in your portfolio for broad-based commodities for a number of reasons, but wait for a pullback, be disciplined, and add layers as commodities experience their little pullbacks,” he said.

Neils Christensen, Kitco