‘Gold is not a very good hedge against anything’ and should be viewed as ‘an investment asset’ – JP Morgan’s Hui

Kitco

Apr 10

(Kitco News) – Gold’s dramatic selloff during the Iran war has weakened its status as a defensive hedge in investor portfolios, and investors should instead treat gold as an investment asset, ...

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has weakened its status as a defensive hedge in investor portfolios, and investors should instead treat gold as an investment asset, ...</p>\n\n<a href=\"https://www.kitco.com/news/article/2026-04-10/gold-not-very-good-hedge-against-anything-and-should-be-viewed-investment\">Source Link</a>\n\n</div>\n","source":"kitco_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>‘Gold is not a very good hedge against anything’ and should be viewed as ‘an investment asset’ – JP Morgan’s Hui</title>\n<style 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hedge in investor portfolios, and investors should instead treat gold as an investment asset, ...</p>\n\n<a href=\"https://www.kitco.com/news/article/2026-04-10/gold-not-very-good-hedge-against-anything-and-should-be-viewed-investment\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"PICK","symbol_name":"iShares MSCI Global Metals & Mining Producers 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that gold is not a very good hedge against anything,” Hui said. “If you look at its correlation with equities or risk assets, it’s not very consistent.”In the 20 days since the attacks on Iran began, gold fell from a high of $5,415 to a low of $4,100 per ounce – a loss of 24% peak to trough – and while prices are well off the lows, gold has struggled to build momentum as the conflict has dragged on.Hui said that many investors still view gold as a hedge against geopolitical events, despite the fact that its track record of performance during these types of events over the past 30 years is weak.“We’re not even talking about 70% of [geopolitical] events get an upside,” he said. “It’s like 50/50. It’s a coin toss.”Hui said gold has a number of things working against it, even outside of geopolitical shocks like the Iran war.“Its volatility is as high as emerging market equities,” he pointed out. “It does not generate income. Obviously, in the last two years, if you owned gold, you didn’t care about income, but the cost of carry is something to think about.”“If you’re owning it to enhance your return because of the fundamentals of central bank buying and the so-called debasement trade, that makes sense, but if you’re owning it in the belief that it can help you to offset market corrections, it’s not a particularly reliable tool.”Despite these drawbacks, Hui said there are still good reasons to own gold, including long-term demand from central banks looking to diversify away from the U.S. dollar as well as investors hedging against the rapid growth of government debt and the money supply.“As the supply of gold growth is limited, so there’s an investment case for gold, but we have to be super clear that gold is an investment asset, not a hedge asset,” he said.“Gold, to us, is still an interesting asset to be included in asset allocation, but we just need to understand that in terms of the role it plays, it’s more of a return enhancement rather than a risk management tool.”J.P. Morgan has consistently backed the view that the gold rally will continue and pullbacks are temporary. On Feb. 17, the firm’s senior brain trust said there’s a reasonable case to be made against gold’s continued appreciation – but that case is wrong.“Gold has had a ferocious rally over the last five years, skyrocketing over 170%, wrote Kriti Gupta, Executive Director of J.P. Morgan Private Bank, and Justin Biemann, Global Investment Strategist. “There’s a laundry list of reasons why, but the biggest driver may be a new era of geopolitical volatility and fragmentation, incentivizing investors to buy the precious metal.”“Now add on worries about currency debasement, growth, inflation and irresponsible fiscal finances that haven’t been fully reflected in sovereign assets,” they continued. “It’s no wonder the precious metal has been a popular asset for investors during times of stress.”For the case against gold, Gupta and Biemann outline two major areas of risk. First, the possibility that central banks halt the recent years’ buying binge.“The biggest driver of gold prices has been central banks,” they write. “Net purchases of gold have doubled since Russia’s war on Ukraine began in 2022. Central banks have fueled demand for the precious metal in efforts to diversify reserves away from the U.S. dollar after the United States froze Russian assets.”The authors point out that outside of the IMF, the top five largest holders of gold are the United States, Germany, Italy, France and Russia. “What if that structural demand from global central banks waned?” they asked. “Or worse, what if they wanted to outright sell the commodity?”They note that this has actually happened before. “From 1999 to 2002, the United Kingdom carried out a series of public auctions to sell over 50% of its gold holdings and diversify its reserves into foreign currencies,” they said. “During the same time, Switzerland voted to delink the Swiss franc from gold. Gold prices fell 13% in the three months following the United Kingdom’s announcement—a move equivalent to a ~$650 drop in today’s terms. The selling only stopped after several central banks signed The Washington Agreement on Gold to coordinate and cap large, price-moving gold sales. The agreement lapsed in 2019, as central banks largely became buyers of gold, not sellers.”The second major risk to gold’s continued price rally is the possibility that retail investors turn their backs on the yellow metal.“Don’t forget retail investors,” Gupta and Biemann warn. “They’ve also been flocking to gold. These new buyers are often building a position as a hedge against rising geopolitical risks and macro uncertainty.”And there are other good reasons for retail investors to hold onto their gold – or buy more.“In addition to hedging against short-term geopolitical risks, gold is a long-term diversifier,” Gupta and Biemann point out. “It’s an asset that can protect against inflation, outperform during drawdowns and reduce overall portfolio volatility, given its relatively low correlation to other assets.”In December, J.P. Morgan Global Research said that new demand from Chinese insurance giants and the crypto community will push gold prices higher in 2026.“While this rally in gold has not, and will not, be linear, we believe the trends driving this rebasing higher in gold prices are not exhausted,” said Natasha Kaneva, head of Global Commodities Strategy at J.P. Morgan. “The long-term trend of official reserve and investor diversification into gold has further to run.”The weaker dollar, lower U.S. interest rates, and economic and geopolitical uncertainty are traditionally positive drivers for gold prices, and all have played a role in the ongoing rally, and the investment bank noted that the metal has served both as a debasement hedge and as a non-yielding competitor to U.S. Treasuries and money market funds.J.P. Morgan Global Research’s price forecasts are based on strong ongoing investor demand, along with continued central bank demand, which they project to average 585 tonnes per quarter in 2026.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"}}}