Monday's Equity Flash Crash Makes Strong Case For Gold - Will Rhind
(Kitco News)- The case for holding broad commodities and gold just gotstronger as U.S. equity markets could struggle following Monday’s flash crash,according to one commodity expert.
In a telephone interview with Kitco News, Will Rhind, CEOof GraniteShares, said that commodities have held up well as investorscontinued to digest Monday’s market correction, which saw the biggest one-dayprice decline in the Dow Jones’ history.
The Bloomberg Commodity Index, while down Tuesday, continuesto hold near the top end of its two-year trading channel, last trading around88 points. At the same time, gold prices are down late in the session, butcontinue to hold critical support, with April gold futures last $1,325.60 anounce, down 0.82%.
While equity markets have bounced off their Monday lows,Rhind said this could only be the start of a larger correction move asinvestors start to price in higher inflation pressures and higher volatility.
“The stock market has had an incredible run but there is apoint that what comes up must come down,” he said. “What we are seeing in bondmarkets, in a weaker U.S. dollar, and rising inflation has to eventually feedinto stock markets.”
Rhind said that in the current market environment, he seesfurther gains for commodities as investors adjust to rising bond yields and aweaker U.S. dollar. In particular, he said that that Graniteshares is seeingincreased demand for broader commodities and building a position specificallyin gold.
“Broader commodities will provide important diversificationagainst inflation and you own gold as a risk management tool,” he said.
Rhind said that although Monday’s market correction was ashock in its size, it didn’t come as major surprise. He said that his firm seensolid demand for its gold-backed exchange traded product (NYSE: BAR) -- toutedas the lowest-cost ETF on the market - as investors look to balance theirportfolio risk. Graniteshares also manages an ETF based on the BloombergCommodity index and another fund based on the S&P Goldman Sachs CommodityIndex.
“People are buying BAR because they have been nervous of amarket correction. Investors turn to gold to preserve their investmentcapital,” he said. “Investors are increasing their exposure to broadcommodities because they hedging against inflation.”
Although gold prices appear to have entered a consolidationperiod, Rhind said that he still sees potential for prices to push higherthrough the rest of the year.
“Immediately, gold could consolidate, but longerterm what this will do is remind investors to think about risk management andthink about the benefit of having low correlated assets in a portfolio,” hesaid.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.