(Kitco News) - If the Fed continues to steadily raise interest rates higher, gold will replace U.S. Treasuries as the “ultimate risk-off asset,” according to the New York-based INTL FCStone.
“If, as I expect, rates will go higher for longer, much higher for much longer, gold will replace Treasuries as the ultimate risk-off asset, and investors should own it as an insurance against equity market risk,” INTL FCStone global macro strategist Vincent Deluard said in the ‘Gold Is The New Treasuries’ report published this week.
The report measures gold’s ability to act as a hedge against stock market volatility, which varies from decade to decade.
“Gold tended to rally a lot on big down weeks for the stock market between 1985 and 1995 when the memories of the great inflation were still fresh. Gold’s value as an equity hedge declined during the “great moderation” of the late 90s. Treasuries emerged as the new risk-off asset during the deflationary years that followed the great financial crisis of 2008. However, gold has outperformed Treasuries on bad stock market weeks since the Fed started hiking rates in 2015,” noted Deluard.
