A number of analysts have begun to weigh the hedging value of gold and other precious metals compared to other market hedges such as cryptocurrencies, given the relative underperformance of precious metals of late. Gold has not performed as a true hedge should in these volatile times, and while gold prices remain elevated from pre-pandemic levels, there are concerns that gold may be an asset class of the past.
The rise of cryptocurrencies to the forefront of the hedging strategies of investors has resulted in a shift of capital flows somewhat of late. Institutional investors have begun to jump on the crypto bandwagon, bidding up the price of Bitcoin and other cryptocurrencies to new record highs of late. These positive capital inflows for cryptocurrencies have not been working in gold’s favour, with the price of gold lagging in these times. With less and less money flowing into gold in times of uncertainty, some analysts are now calling the end for gold’s reign as a chief market hedge.
That said, I do think that gold does have some excellent long-term fundamental reasons investors ought to consider owning a small position in one’s portfolio. When gold goes on a run, the results can be pretty impressive. During recent bull market runs in gold, investors who were bearish on the market outperformed by staying fully invested – the gold weighting in many investor portfolios stemmed the losses, and helped smooth out returns during difficult times. Such will be the case moving forward, as I see gold as an undervalued asset class relative to historical levels.
Invest wisely, my friends.
