Given the price of gold has fallen above 11% over the past six months, some investment managers are questioning their hedging state.
According to Bloomberg, Ross Kestrich, a portfolio manager at BlackRock’s Global Allocation Fund, is currently failing to prove that gold is a viable inflation hedge.
In fact, Kesterich challenged the common hedge myth of gold assets, saying, “Gold’s ability to hedge inflation has been somewhat overstated. While this is a very reasonable value in the long term – think centuries ago – it is less reliable than most investments. . horizons. ”
The current investment horizon appears to be dominated by the effects of the coronavirus pandemic and the various measures taken by the authorities in the form of economic stimulus packages.
Fear of inflation is currently being felt amid massive stimulus spending to drive the economic recovery.
Since reaching a new steady high of $ 2,100 an ounce in the summer of 2020, gold has plummeted and is trading above $ 1,700 at the time of writing.
The drop in gold prices has also caused major turmoil in gold ETFs, with some market analysts saying that investors are turning to Bitcoin (BTC). In November 2020, Chinese banks began suspending opening new accounts for precious metals due to increased price volatility, such as gold.
In contrast to spot gold prices, Bitcoin is up nearly 90% as the largest cryptocurrency by market value has maintained a positive exchange rate since October 2020. As Cointelegraph previously reported, Mike McGlone, Bloomberg’s chief strategist, said BTC is “pushing” Gold as a depository of accounts receivable.
Kesterich’s warnings about holding gold as a way to hedge the current investment horizon came after some positive comments from BlackRock about Bitcoin.
The world’s largest asset manager previously identified bitcoin derivatives as a potential investment in a registry with the U.S. Securities and Exchange Commission earlier in the year.
In November 2020, Rick Reader, investment director at BlackRock Financial Management, stated that Bitcoin could largely replace gold.