GOLD : Over Stocks ?
(Wed, 29 July 2020). Richard Bernstein expects stocks to undergo a rough period in the near-term. A fading dollar, he argues, could benefit gold.
Stocks could become vulnerable once again as the U.S. dollar shows signs of a further correction. Richard Bernstein and Ray Dalio foresee a weakening dollar in the near-term. Strategists believe investors would increasingly favor gold as a haven asset and a hedge against uncertainty. Wall Street veteran investor Richard Bernstein expects stocks to undergo a rough period in the near-term. A fading dollar, he argues, could upset many investors, and might benefit gold.
U.S. stock futures were rocky Tuesday. Gold declined after hitting a new all-time high as the dollar slump paused.
Investors and Strategists Sing the Same Tune About Gold, the Dollar, and Stocks
Historically, a weaker dollar correlates with underperforming stocks and a prolonged gold rally. Now, more top strategists and investors are starting to echo a similar stance. Bernstein emphasized that an extended dollar downtrend could affect the markets negatively. He said investors need to establish a balanced portfolio to offset such risks. While investors fear a further correction in the dollar, the sentiment on gold as an alternative investment remains mixed.
The caution stems primarily from gold’s explosive rally in the past month. The price of spot gold surged 8% in July, hitting a new record high. Investors question whether the yellow metal has enough fuel in the tank for an extended rally. According to Bernstein, gold is still valuable to fit in a portfolio, especially in an uncertain environment.
As Long As Uncertainty Remains, the Precious Metal Is Attractive
Top pharmaceutical giants, like Moderna and Pfizer, are developing vaccines, but virus cases are continuing to soar. Some countries that have achieved a clear peak in cases, like Vietnam, for example, started to see new cases once again. Based on the trend of virus cases and the cautious optimism towards vaccines, Bernstein expects more uncertainty in the near term. Against economic instability and a lack of clarity, Bernstein said gold is a “very good hedge.”
Analysts also point to worsening U.S.-China relations as a short-term boost for gold. The relationship between the two superpowers is showing no signs of improvement. If the global economy slows, gold would continue to rise, according to Ally Invest chief investment strategist Lindsey Bell. Investors are already exploring various safe-havens to counterbalance their portfolios coming off a V-shape recovery in stocks. In the upcoming months, strategists believe gold’s market sentiment could continuously improve.
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