World's biggest asset manager says gold is failing as a hedge against inflation and stocks

<p><img src="https://static6.businessinsider.com/image/6049e70df196be0018beec50-2400/GettyImages-1227918352.jpg" border="0" alt="GettyImages 1227918352" data-mce-source="David Gray/Getty Images" data-mce-caption="BlackRock said gold remained correlated with the dollar"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><ul class="summary-list"><li>A BlackRock portfolio chief said gold is positively correlated with stocks, especially tech companies.</li><li>Russ Koesterich also said gold is lackluster as a hedge against inflation in the medium term.</li><li>But the portfolio boss said it still seemed like a good hedge against the dollar.</li><li><strong><a href="https://newsletter.businessinsider.com/join/4np/10-things-opening-bell'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener">Sign up here for our daily newsletter, 10 Things Before the Opening Bell</a>.</strong></li></ul><p>Gold is failing as a hedge against both equities and inflation, a portfolio boss at the world's biggest asset manager BlackRock has said.</p><p>In a <a href="https://www.blackrock.com/us/individual/insights/another-hedge-bites-gold">blog post</a> on Wednesday, Russ Koesterich said gold trades "with a positive correlation" with stocks, causing problems for investors who want to protect themselves against falling equity prices.</p><p>"<a href="https://markets.businessinsider.com/commodities/gold-price">Gold</a> has been rising roughly 0.2% for every one percentage point rise in the S&amp;P 500," Koesterich wrote. "True, that still represents a gap in performance, but from a portfolio construction standpoint, it means gold is a less effective hedge."</p><p>He said the relationship was even stronger for <a href="https://markets.businessinsider.com/index/nasdaq_100">high-growth tech stocks</a>, with the correlation at around 0.5. "Put differently, gold and tech are increasingly moving in tandem."</p><p>The portfolio manager for BlackRock's $16.4 billion Global Allocation Fund said this failure would be forgiven if gold protected against <a href="https://www.businessinsider.com/what-is-inflation">inflation</a>. But "unfortunately, gold's ability to hedge against inflation has been somewhat exaggerated," he said.</p><p>"While it is a reasonable store of value over the very long-term, think centuries, it is less reliable across most investment horizons, including the most recent period."</p><p>Koesterich, who is also a managing director at the $8 trillion asset manager, said although inflation expectations have risen over the last few months, "gold has demonstrated little correlation with daily, or weekly moves."</p><p>Gold has declined by around 5% over the last few months, despite expectations of inflation rising to their highest since 2008, according to a key bond-market gauge called the <a href="https://fred.stlouisfed.org/series/T5YIE">5-year breakeven rate</a>.</p><p>Koesterich said the price has struggled in the face of <a href="https://www.businessinsider.com/bond-yields-rising-stock-market-falling-explainer-blackrock-2021-3">rising bond yields</a>. And he said these dynamics are likely to continue to be a problem for gold, given that yields are expected to keep rising.</p><p>Yet he added that gold should "probably still be thought of as a dollar hedge" because "it is still demonstrating a strong, negative relationship with the dollar."</p><p>The BlackRock executive said that a collapse in the dollar could therefore spur gold higher.</p><p><a href="https://markets.businessinsider.com/news/stocks/blackrock-gold-failing-hedge-inflation-stocks-tech-2021-3-1030172253#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/how-symphony-seas-worlds-largest-cruise-ship-deals-with-waste-2020-3">How waste is dealt with on the world's largest cruise ship</a></p>
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