Hedge funds are turning to gold as negative yielding debt grows by the day.
Morphic Asset Management Pty is even betting on gold to outperform the dollar.
“We’re on watch for a recession and I think many roads at the moment still lead to gold.” This is a statement by Geoff Wood – Morphic Head of Macro and Risk in Sydney.
Increased concern about an economic downturn triggered by disappointing economic data has encouraged macro funds to seek out yield and returns.
Gold could be their refuge. Many are preferring gold as they believe bonds are too expensive and gold has risen by 18% this year which is well ahead of fellow havens including the Yen, Swiss Franc and Treasuries.
In Sydney AMP’s Nader Naeimi said, “long bonds, long gold is the way to go”.
Not everyone is convinced There are those who have doubts regarding an upcoming recession.
“The US economic conditions are quite good, with unemployment near a 50-year low” said, Federal Reserve Bank of St Louis President James Bullard.
The Reserve Bank of Australia’s number two questioned the reliability of using the Treasury yield curve inversion as a sign of recession.
“At the moment the US economy is actually growing above trend, so they’ve got a fair way to slow from here” said RBA deputy Governor Guy Debelle.
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