On March 12, the Bureau of Labor Statistics (BLS) will release its February inflation report amid concerns that inflation could rise for a fifth straight month. Should the report show that prices increased again, markets may react with volatility and cause investors to search for ways to safeguard their portfolios from potential losses. 

In turbulent economic times, investors have often turned to gold for protection because of the benefits it provides when inflation rises. This is partially why gold investing spiked in recent years and why the price of the precious metal continues to surge. But is buying gold before an inflation report comes out a smart strategy? Below, we’ll break down what to consider.

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Why you should invest in gold before the March inflation report

Here are three reasons why investing in gold before the March inflation reading is released makes sense:

Portfolios will need the protection against inflation impacts

If the next BLS inflation report shows that prices rose in February, it will be the fifth straight month inflation has increased. Even if the report shows inflation held steady at 3% or dropped, it will still be higher than the Federal Reserve’s target rate of 2%. 

Gold is a go-to hedge in situations like this. Currency tends to lose value when inflation surges since consumers’ dollars can’t buy as much as they used to. So, investors and central banks turn to gold for stability. That increased demand for gold boosts its value, acting as a hedge against rising inflation. Buying gold today puts you ahead of the rush to buy the metal if next week’s report reveals another month of higher prices.

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It can diversify your portfolio when stocks react poorly to inflation readings

When an inflation report indicates prices are rising, stock market volatility tends to ensue. It’s not uncommon for the market to decline amid an inflation surge, eating away at the returns investors get from their portfolios. When this happens, gold’s relative stability becomes a must-have for many investors.

Adding gold to your portfolio improves your diversification not just because precious metals may not be a part of your investment strategy right now, but because gold usually increases in value as other assets struggle to maintain their value during inflationary periods. Consequently, gold is a popular safe haven in those times. 

As you plan your gold purchase ahead of next week’s report, remember that experts suggest you limit the metal to 10% of your portfolio. 

Waiting for the inflation report to reverberate could cause the price to rise

Taking a wait-and-see approach to how the market responds to the upcoming inflation report might backfire. Investors are already skittish about the economy; they may converge on gold quickly if the report indicates prices rose again in February. If that happens, gold’s already record-high cost could shoot up even further, possibly becoming cost prohibitive for you. 

Instead of waiting to see how the market responds to next week’s report, buying gold today will help you avoid being priced out and provide a steadying element to your portfolio if market volatility increases in the coming weeks.

The bottom line

As we prepare for the results of next week’s inflation report, investors would do well to buy gold ahead of time to preemptively hedge against another possible inflation increase and improve their portfolio diversification. Even if the report shows inflation held steady or cooled and you decide to liquidate your gold, the metal is typically easier to sell than securities such as bonds.