Five Percent In Gold Makes Sense As Volatility Rises - BlackRock
(Kitco News)- The world’s largest investment firm thinks that holding evena little bit of gold will help to smooth out growing volatility in financialmarkets.
In an interview Tuesday with Bloomberg New, Russ Koesterich,head of asset allocation for BlackRock Inc.’s global allocation team said thefund increased its holding in gold in recent weeks as volatility has picked up.The investment firm currently manages more than $6 trillion in total assets.
“Our gold position is around 5%. I think that is about rightfor the fund,” he said.
Koesterich, came as gold prices saw their worst one-dayselloff since December 2016. The market was driven lower because of the U.S.dollar bouncing off a three-year low and technical profit taking after gold sawnearly 3% gains the previous week. April gold futures continue to hover nearits recent lows, last trading at $1,332 an ounce, relatively unchanged on theday.
Koesterich explained that he sees gold as a hedge against volatilityrisk. He added that he expects the rise in volatility to be a permanent fixturein markets. He said that volatility is rising because of the growing threat ofmore aggressive Federal Reserve monetary policy tightening because of risinginflation.
“I think the most important thing about gold is it is a riskmitigant,” he said. “If part of what you want to do is have a portfolio thatcan dampen that volatility, create a smoother ride, then I think having amoderate amount of gold helps.”
In its latest monthly report, Blackrock said that it isrelatively neutral on gold as analysts expect prices to remain range-boundthrough 2018. While the global economy continues to expand -- reducing gold’ssafe-haven appeal -- the firm believes that there is still a strong argument tohold the yellow metal in an environment of overvalued equity markets.
“We feel investment demand will continue to be the maindriver of the gold price and this will be influenced by the level of financialmarket uncertainty,’ the analysts said in the report. “For gold to break out ofthe top of its current range we feel it is likely that broader equity marketswould need to pull back or inflation expectations would need to materiallyincrease.”
By Neils ChristensenFor Kitco News
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