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BlackRock Constructive On Gold In 2019

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(Kitco News) - Gold will continue to shine as a valuable portfolio hedge in 2019, according to one investment manager at the world’s largest asset management firm.

The outlook on gold remains positive for this year as fears of a global economic slowdown continue to weigh on investor sentiment and as volatility picks up in equity markets, Russ Koesterich, portfolio manager at BlackRock Global Allocation Fund, told Bloomberg in an interview last week.

Russ Koesterich, portfolio manager at BlackRock Global Allocation Fund

Koesterich did not provide a price target for gold in 2019. His comments come as gold prices in December saw their best gains since Jan. 2017. Prices continue to hold on to its recent gains; February gold prices last traded at $1,285.40 an ounce, down 0.34% on the day.

“We’re constructive on gold,” he said. “We think it’s going to be a valuable portfolio hedge. We’re multi-asset investors: we think about its effect on the entire portfolio, and what we see value in right now is gold’s value as a diversifier.”

Koesterich added that although his firm is not expecting to see a recession in 2019, it is forecasting slower growth this year. According to its outlook, the 6-trillion investment fund sees a 19% chance of a recession this year.

“The relationship between uncertainty, volatility and gold’s relative performance, it’s something that’s worth watching,” he said. “It has been a store of value for a very long time, and again, it has had a very consistent record of helping mitigate equity risk when volatility is rising.”

The firm is also neutral on the U.S. dollar, which Koesterich said is a critical headwind for the yellow metal.

“We see little impetus for further dollar strength given a relatively high valuation and few attributes that differentiate US assets from the rest of the world,” the analysts said in their outlook report.

Along with a stable U.S. dollar, Koesterich said that a pause in interest rates would remove another obstacle for gold.

BlackRock’s view on gold has been shifting since July when Koesterich said in a commentary that the yellow metal looks undervalued.

Based on 13-F filings with the Securities and Exchange Commission, as of the end of the third quarter, BlackRock holds 53.2 million shares of its iShares Gold Trust exchange-traded product, the third largest position in the ETF (NYSE: IAU). At the same time, the firm holds 1.085 million shares of SPDR Gold Shares, (NYSE: GLD).

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