Gold ‘among most vulnerable asset classes’
Dubai, July 10, 2013
Gold, long-dated bonds and emerging markets are the most vulnerable asset classes to a tapering of the US quantitative easing (QE) programme, a report said.
The US Fed’s suggestion that QE “tapering” will likely begin in the months ahead has triggered sell-offs in most asset classes, added Compass, Barclay’s monthly Wealth and Investment Management flagship research report which focuses on providing investment advice and recommendations to investors across the globe.
Kevin Gardiner, head of Investment Strategy EMEA, for the Wealth and Investment Management division at Barclays, said: “Gold is particularly vulnerable as we transition to monetary normality. Many investors own it for its perceived ability to guard against the more inflationary – and dollar debasing– consequences of QE.
“That ability, and those risks, have been overstated, and gold – which carries no yield – is exposed as a result. Most investors’ holdings of gold should be in the low single digits as a percentage of their investment portfolio.”
The report highlights that stocks are vulnerable short-term, but are inexpensive and can eventually benefit from the better growth outlook the Fed sees ahead.
Barclays has long preferred developed markets (been tactically overweight), but been no lower than neutral on emerging equities. Stocks remain the least expensive of the big asset classes. Emerging stocks, having underperformed since late 2010, look cheaper, but are more vulnerable to financing flows.
“We already had a long-standing underweight in Investment Grade Credit and, while we are tactically neutral on government bonds, they have looked so expensive to us for such a long time that our strategic (long-term) weightings are small to start with,” added Gardiner.
Overall, Barclays continues to advise a strategically underweight position in government bonds and a tactical underweight in investment grade credit (and cash), and remain neutral on emerging equities and on diversifying assets. – TradeArabia News Service