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<\/a><\/p>\nBullion has lost ground in 2021 as the recovery from the pandemic gains more traction and Treasury yields surge, although the haven has made a partial comeback this week. The typical case for holding the metal in a multi-asset portfolio is that it can help to balance out shifts in other holdings, especially equities.<\/p>\n
But BlackRock says that right now gold isn\u2019t working well as a hedge against either stock moves or inflation risks, although it was against the dollar.<\/p>\n
\u201cAbsent a strong view on a declining dollar, I would own less gold,\u201d Koesterich wrote in the March 10 entry, noting that the precious metal was still demonstrating a strong inverse relationship with the US currency. \u201cAnd for those investors still looking for a hedge, one word: cash.\u201d<\/p>\n
Spot gold traded at $1,734.57 an ounce at 7:19 a.m. in London, down more than 8% this year, while a gauge of the US currency has risen about 2%. Among equity benchmarks, the S&P 500 Index has gained almost 4% in 2021.<\/p>\n
\u201cWhile gold\u2019s recent correlation with stocks and inflation has been positive to effectively zero, it is still demonstrating a strong, negative relationship with the dollar,\u201d said Koesterich. \u201cFor this reason, gold should probably still be thought of as a dollar hedge.\u201d<\/p>\n
As leading economies seek to strengthen the recovery from the pandemic, Joe Biden\u2019s $1.9 trillion Covid-19 relief bill cleared its final congressional hurdle Wednesday, with the House passing the bill on a 220-to-211 vote. That sends the measure to the US president for his signature.<\/p>\n
\u2018Prove a headwind\u2019<\/strong><\/p>\n \u201cMore stimulus and improving vaccine distribution suggest the possibility of an economic surge,\u201d he wrote. \u201cShould this happen, real rates are likely to continue to rise from still historically depressed levels. As has been the case the past month, this will likely prove a headwind for gold.\u201d<\/p>\n Bullion\u2019s decline this year has been accompanied by a steady drawdown in holdings in gold-backed exchange-traded funds, while banks have chopped price targets after the asset hit a record in 2020. Global ETF volumes have sunk to the lowest since June, losing about 150 tons so far in 2021.<\/p>\n Banks paring forecasts include UBS Group AG and Goldman Sachs Group Inc, with the latter noting that the main reason behind gold\u2019s underperformance is a strong rotation into risky assets on the back of a repricing of global growth. In January, ABN Amro Bank NV warned that gold had peaked and would drop.<\/p>\n
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