What’s going on?

• BlackRock thinks that gold might not protect investors that much.

What does that mean?

• Gold is typically thought of as a hedge: protecting investors from inflation by rising alongside the prices of goods and services and stock market drops (given that investors usually buy gold in bear times).
• But BlackRock thinks there is a flaw: holding gold might be justified for hundreds of years, but very few investors tend to last that long, making its relationship with inflation and stocks not to be actually that strong.
• Instead, BlackRock reckons the best hedge is cold hard cash – especially while inflation is so low.

Why should I care?

For markets: Gold is still keeping up with US dollar

• At least gold’s negative relationship with the US dollar is sustaining, mostly because gold is priced in dollars, so a cheaper dollar generally makes the gold look cheaper to non-US buyers, tempting them to buy in and thus pushing its price.

The bigger picture: It might not be so attractive eventually

• Gold might become more valuable over time, but it doesn’t pay investors dividends or interests like a stock or bond. So when the economy recovers, inflation picks up, and interest rates rise,  investors might start to lose interest in gold.

Content source: Finimize (2021) All That Glitters. Available at: https://www.finimize.com/wp/news/all-that-glitters/ [Accessed on Mar 12, 2021]