There Is Still A Case For Gold, JustAt A Lower Exposure - BlackRock
(Kitco News)- The world’s biggest fund manager still sees a case for gold,it’s just warning investors not to be overweight the precious metal in theirportfolios.
In its latest monthly gold report, analysts at BlackRockwarned that they expect gold prices to remain range bound for the nextyear-and-a-half as the yellow metal faces an uphill battle against a growingglobal economy.
“We are optimistic on the outlook for global economic growth, which coulddampen ‘safe-haven’ interest for gold and act as a headwind,” the analysts saidin the report. “However, we see powerful arguments behind allocating to goldtoday, with geopolitical risk elevated and equity markets near all-time highs.”
Thecomments come as gold market is attempting to recover after seeing significantselling pressure last week. Friday, gold had its worst one-day performancesince May as prices dropped to a six-month low, falling nearly 2%.
Bargainhunting at the start of the new trading week has helped the yellow metal holdcritical support above a 2015 trend line. August gold futures settled Monday’ssession at $1,280.10 an ounce, relatively flat on the day.
Lookingahead, the firm said that it is watching inflation pressures closely as thiswill be a significant driver going forward.
“Shouldinflation rise faster than the US Fed raises rates this year, this woulddepress real rates and would be a material positive for gold,” they said.
The firm is also watching the U.S. dollar, with the analystssaying it is in a long-term bear market. However, in a commentary publishedearlier in the month, Russ Koesterich, CFA, portfolio manager and a member ofthe global allocation team with BlackRock'smulti-asset strategies group, said that the U.S. dollar could benefit fromshort-term momentum as it makes gains against the euro.
“For the first time in years, investors arebeginning to question the long-term sustainability of the euro. These fears areprobably overblown...” he said. “In an environment of a stronger U.S. economy andresurgent European political risk, the dollar may, at least temporarily, resumeits former role as a safe-haven currency. All else equal, a stronger dollar isa headwind for gold. As such, I would reiterate my thinking from last November:Don't abandon gold, but own less than you normally would.”
Euroweakness is helping the U.S. Dollar Index hold near a seven-month high, lasttrading at 94.78 points.
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.