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BlackRock fund manager reduces stake in gold to near zero

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(Kitco News) - Russ Koesterich, fund manager at BlackRock, has said he has sold almost all of his gold holdings on expectations that real rates will normalize as the global economy rebounds.

He noted during an interview with Bloomberg Television, "Fourteen months ago, we had a fairly significant position in gold. Today, we've reduced it to almost zero,"

Koesterich added. "If part of our view is that real rates normalize a bit, that particular commodity is unlikely to work as well as it did in the middle of 2020."

Koesterich said he also doesn't consider it the most effective hedge against short-term inflation. Expectations that inflation-adjusted yields on U.S. bonds will rise means the metal will no longer function as a hedge against equity markets. 

"Rather than own an asset that doesn't produce any cash flow, we'd rather hedge some of the near-term upside in inflation with stocks that have pricing power," he said, citing industrials, materials and consumer sectors as examples.

Since hitting a higher of $2075.14/oz in August 2020, the yellow metal has been consolidating around the $1800/oz mark for a while. There are some key decisions to be made by the Fed as inflation continues to rise, but the post-pandemic economic situation improves.

The Fed has been talking above tapering some of the pandemic stimulus by the end of this year. Still, it could be slightly premature to talk about a rate rise. The combination of employment and inflation is a key metric to watch and could give us clues to when the Fed is likely to act.


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