According to Blackrock, a portfolio manager and member of the Global Distribution Fund, gold is now a less effective hedge against inflation and against movements in other assets such as equities. In a commentary that seems to underestimate the known status of the precious metal, Russ Kosterich argues that gold’s ability to hedge against inflation is somewhat overrated.
Gold less reliable in most investment horizons
While Kosterich still recognizes gold’s status as a reasonable store of value over the very long term, he believes it is less reliable over most investment horizons. Kesterich’s company, Blackrock, which manages nearly $9 trillion in assets, appears to have already taken action on the new findings. As Bitcoin.com News reports, Blackrock has begun investing in BTC.
Nevertheless, as one report notes, gold has for years been considered part of a multi-asset portfolio that can help offset changes in other holdings, including equities. However, as this Blackrock executive notes, gold is not currently doing well as a hedge against equity movements or inflation risks, although it has done so against the dollar.
Fall in ETF gold volumes
To back up Kesterich’s claims, the report simultaneously relies on the precious metal’s recent performance against the dollar and U.S. stocks. The report, which contains data from 11. March used, says:
Spot gold was trading at $1,735.16 per ounce at 9:35 a.m. in London, down more than 8 percent this year, while the U.S. currency rose about 1.8 percent. The S&P 500, the benchmark index for stocks, is up nearly 4% in 2021.
In addition, the report notes that the fall in the price of gold in 2021 has been accompanied by a steady decline in the funds available in gold-backed exchange-traded funds. According to the report, global ETF volume has fallen to its lowest level since June, losing about 150 tonnes so far in 2021.
At the same time, the portfolio manager’s forecast for the precious metal alludes to possible obstacles for the commodity. Kesterich cites increased stimulus spending and improved vaccine distribution as reasons for the negative outlook, which points to the possibility of an economic recovery. Kesterich’s view on the outlook for gold is also shared by ABN Amro Bank, which warned in January that gold had peaked and would fall.
Do you agree with Kesterich’s view on gold? Tell us what you think in the comments below.
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