Page 25 - ARUBA TODAY

BUSINESS Monday 5 March 2018
A25

Funds expert Q&A: Gold is good hedge to volatility in 2018

By ALEX VEIGA susceptible to inflationary
AP Business Writer Q: How is the market for trends and it is susceptible
Gold has traditionally been gold faring this year in light to when real rates are ris-
considered a refuge for of the recent market cor- ing, maybe losing some of
investors seeking shelter rection? its relative attractiveness.
from a volatile stock mar- A: Gold as a portfolio At any point in time when
ket, though the big mar- hedge and as hedge in you’re a holder of gold,
ket tumble this month may terms of signs of stress is do- you’re holding it to diversify
have been an exception. ing exactly as advertised. away from the current en-
Despite the market’s first It’s delivering that diver- vironment. That is a factor
correction, or drop of at sification benefit, and it that’s out there, obviously,
least 10 percent from a has done that, especially relative to if the economy
recent peak, in two years, through the volatility over is doing really, really well,
there wasn’t much of a the last couple of weeks. real rates are rising and
flight to gold or other safe- What we do find maybe earnings for equities are
haven assets. In fact, the interesting or slightly differ- increasing over time. So it
price of gold pulled back ent is the long-term outlook might not be the best rela-
somewhat along with the here. When you’re in an en- tive holding over that pe-
drop in stocks, though it vironment where equities riod of time.
has held above $1,300 sold off, in part, because
an ounce this year. The of a shock to real rates or Q: The 2018 outlook for the
precious metal is up 7.5 interest rates or the inflation U.S. economy and compa-
percent over the past 12 outlook as a whole, typi- ny earnings remains strong.
months. cally that’s not the best en- At the same time, there’s a
One reason the steep mar- vironment for gold overall. likelihood of higher interest
ket sell-off may not have But it’s working as a great rates and more market vol-
spurred a big move to diversification benefit at atility. Where does a gold
gold is many economists the moment. hedge fit into this?
and Wall Street experts A: We think the global
still project strong global Q: Many economists ex- economy has room to run,
economic growth and im- This photo Tushar Yadava, investment strategist for US iShares pect interest rates to rise even though a lot of that
proved company earnings at BlackRock. Gold has traditionally been considered a safe- this year. How is that likely expansion occurred in
this year. haven for investors seeking shelter from a volatile stock market. to affect the gold trade? 2017. We think there’s room
Still, many market strate- Yadava weighed in on how investors should think about gold in A: What I would say is, gold to run in an expansionary
gists also expect that Wall 2018 during an interview with the AP. doesn’t have any cash outlook, but we also think
Street’s long period of rela- (BlackRock via AP) flows. It is purely a stored inflation is probably making
tive calm is at an end. Un- at BlackRock, weighs in. which invests in physical value over time, so it is a comeback. q
like 2017, investors are now BlackRock’s funds include gold.
increasingly jittery about the iShares Gold Trust ETF, Answers have been edited
the possibility that infla- or exchange-traded fund, for clarity and length.
tion could begin rising this
year and lead the Federal
Reserve to speed its time-
table for interest rate hikes,
concerns that have driven
bond yields sharply higher
lately. Commodities like
gold tend to act as good
hedges against inflation
and the weak dollar, which
has been relatively softer
since last year.
In light of that tug-of-war
between a strong mar-
ket outlook and concerns
that inflation could stage
a comeback, what are the
prospects for further gains
in gold funds?
Tushar Yadava, investment
strategist for US iShares