Gold prices soared to a five-month high after US inflation data hit their highest level in 31 years. But according to the world’s largest wealth management firm, it still may not be enough to sustain demand for this precious metal. Russ Koesterich, general manager and portfolio manager of the BlackRock Global Allocation team, discusses various investment tools to hedge inflation. we too cryptocoin.com We have compiled the reviews of the famous manager for you.
“Precious metal is not a particularly reliable hedge”
In a recent report released ahead of Wednesday’s Consumer Price Index data, BlackRock portfolio manager Russ Koesterich reiterates his stance that gold is not a hedge against major inflation. Russ Koesterich comments on the report:
As I discussed last winter, gold is struggling with floating real rates, a stronger dollar, and declining activity as a hedge. For now, I’ll look elsewhere to hedge inflation and keep the gold risk low. While gold holds its own position for the very long term, it is not a particularly reliable hedge outside of decades-long horizons. For most of the year, gold showed almost no correlation with daily or weekly movements in long-term inflation expectations.
The BlackRock portfolio manager notes that inflation has been hot for most of 2021 and gold prices are struggling to find consistent upward momentum. Even after gold’s impressive rally on Wednesday, prices are still in the range Russ Koesterich expected. Gold prices rose 0.77% on the day to trade at $1,863 an ounce, after session highs. The famous executive says that he does not see Bitcoin or cryptocurrencies as a hedge against inflation risk, along with gold:
While the increasing adoption of cryptocurrencies may continue to push prices higher with extreme volatility and a short history, Bitcoin’s value as an inflation hedge is uncertain.
Gold not keeping up with rising inflation expectations, says Russ Koesterich
On what makes good inflation hedges, Russ Koesterich thinks investors should stick with cyclical stocks:
While gold hasn’t kept pace with rising inflation expectations, there are many cyclical sectors including energy, materials and select consumer items.
However, there’s also a silver lining. The BlackRock portfolio manager says silver may be a better option if investors are determined to hedge inflation with precious metals:
Silver has important industrial uses and has recently tended to move with short-term inflation expectations. While silver isn’t a “silver bullet,” it can be part of the arsenal.
In September, Russ Koesterich said in an interview that BlackRock sold most of its gold with the expectation that real interest rates would normalize. Meanwhile, real interest rates fell to a record low after October’s CPI data, which showed US annual inflation increased by 6.2%.
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