Should investors hold some in a bear market? Experts weigh in

The precious metal, often referred to as an “inflation hedge” and commonly referred to as a “safe haven,” looks lackluster.

Gold (CG=F) is down 23% from its March peak and 10% since the start of the year.

In our “What to do in a bear market” series, we asked the experts to tell us if there is value in holding gold in this environment.

Why hasn’t gold performed better this year?

“First, with the tightening of policies by the world’s major central banks, this has helped send bond yields to multi-year highs. Yield-seeking investors are better off holding government bonds for a guaranteed return. rather than holding zero-return assets like gold,” Fawad Razaqzada, market analyst at City Index and told Yahoo Finance.

“Second, the strengthening US dollar has weighed heavily on almost all major dollar-denominated assets, including gold. Potential buyers who earn in foreign currencies have to pay more, and so they are discouraged from investing in the gold,” he continued.

Should investors hold gold in their portfolios, and if so, how much?

This is where fund managers and strategists really differ.

“We don’t recommend a fixed allocation to gold unless investors want to speculate on exchange rates or have some other short-term bullish thesis that could cause gold to appreciate,” Jay Hatfield, manager of portfolio of the InfraCap Equity Income Fund (ICAP) ETF told Yahoo Finance.

Rob Haworth, senior investment strategist at US Bank Wealth Management, generally recommends “little or no permanent exposure to gold or metals for portfolios given the volatility in prices and the lack of consistent income streams. “.

“Investors may consider very modest exposures if they are particularly concerned about a reversal in the value of the U.S. dollar, which could further ease inflationary pressures and support gold prices,” Haworth said. .

Others support a small exposure in a portfolio.

“In general, while each investor’s situation is unique, we believe that a 3-5% allocation to gold products would seem sized enough to capture the benefits of holding gold as an asset class.” , says Imaru Casanova, Deputy Portfolio Manager/Senior Gold Analyst. at VanEck

Mohit Bajaj of WallachBech Capital told Yahoo Finance that he is “a big proponent of always allocating across the board in all kinds of asset classes. Between 5 and 10%…should be more than enough.”

For investors who want to hold the yellow metal, which is better: Physical gold or paper gold (investments that hedge gold AND F)?

Some experts point to security and storage issues when it comes to physical gold.

Louis Navellier, founder and chief investment officer of Navellier & Associates tells Yahoo Finance that he doesn’t recommend physical gold, but he has some advice for those who insist on holding it: “There’s a big markup on coins , so Credit Suisse bars are usually sold with a lower profit margin. »

Regarding ETFs, Navellier says, “I don’t recommend gold ETFs because I don’t like paying ETF spreads.”

But WallachBech’s Bajaj recommends SPDR Gold Shares (GLDs), “if you want access to gold without having to physically buy the metal.”

GraniteShares Gold Trust (BAR) “is another that we’ve seen strong demand for,” Bajaj said.

“From a price point of view, it’s only $16 or $17, so for those who are novice investors who want to get their foot in the space, they can buy it without having to spend that much capital,” he added.

Ines is a markets reporter for Yahoo Finance. Follow her on Twitter @ines_ferre

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