(Bloomberg) — BlackRock Inc. fund manager Russ Koesterich has sold nearly all of his gold stocks on the expectation that real interest rates will normalize as the global economy recovers.
“Fourteen months ago we had a fairly significant position in gold. Today we’ve narrowed it down to almost zero,” Koesterich, the manager of the BlackRock Global Allocation Fund, said during an interview with Bloomberg Television. “If part of our view is that real interest rates are normalizing a bit, it’s unlikely that particular commodity will work as well as it did in mid-2020.”
Gold is down more than 7% in 2021 after soaring to an all-time high on a wave of investor money last year. The global economic recovery and high inflation have raised the prospect of central banks winding down their stimulus measures, which would curb the attractiveness of precious metals. The Federal Reserve may announce its timeline for curbing bond buying at a meeting next week, and the pace of that will be crucial to gold’s fortunes.
Expectations that inflation-adjusted yields on US bonds will rise means that the metal will no longer act as a hedge against stock markets, Koesterich said. He also doesn’t consider it the most effective hedge against short-term inflation.
“Rather than owning assets that don’t generate cash flow, we’d rather hedge some of the upside potential of short-term inflation with stocks that have pricing power,” he said, citing industrial, materials and consumer sectors as examples. quoted.
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