Gold’s function as a hedge is exaggerated


BlackRock manager: „Gold’s function as a hedge is exaggerated“.

Russ Koesterich sees gold as a far less good hedge than often propagated.

As gold has lost more than 11% of its value in recent months, more investment managers are questioning the precious metal’s status as a market-leading hedge.

As Bloomberg reports, Russ Koesterich, portfolio manager of the Global Allocation Fund at the powerful asset management firm BlackRock, is now one of those doubters.

Accordingly, he is sober in his assessment of the common narrative around gold as a hedge: „The function of gold as a hedge against Bitcoin Bank review inflation is overstated. Although it is a useful store of value over very long-term periods, centuries, it is far less reliable over most practical investment periods.“

The current investment periods are heavily influenced by the impact of the Corona crisis, with government-initiated bailouts and central bank monetary policy leading the way in influencing markets.

In particular, the fear of rising inflation is haunting the markets, as the massive aid packages to save the economy could lead to a devaluation of many national currencies.

Gold, the hedging medium favoured by investors, has nevertheless lost ground steadily since the summer of 2020, after reaching a new record high.

At the time of going to press, the precious metal is therefore only at 1,700 US dollars

The loss in value is underlined by the fact that more and more capital is also being withdrawn from gold ETFs. Some experts suspect that the investors concerned are migrating into Bitcoin (BTC). In November 2020, Chinese banks even stopped creating new trading accounts for precious metals, as gold and co. are showing unusually high volatility.

In contrast to gold’s price performance, Bitcoin is up almost 90% for the year, with the market-leading cryptocurrency already on a record run since October 2020. As previously reported, Bloomberg analyst Mike McGlone therefore concluded that BTC is outperforming gold as the best store of value.

Koesterich’s doubts about the precious metal come against the backdrop of BlackRock’s recent clearly positive comments about the cryptocurrency.

Thus, in an official letter to the US Securities and Exchange Commission (SEC), the „secretive world power“ is thinking aloud about investing in Bitcoin derivatives.

BlackRock chief investor Rick Rieder had already hinted in November 2020 that the asset management company was planning such a change in strategy when he said that Bitcoin will gain large market shares from gold in the long term.