Cash and Gold Emerge as Alternative Hedges Amid Market Turmoil

US Treasuries, yen, and Swiss franc lose appeal as safe-haven assets amid rising inflation and market volatility. Cash and gold emerge as alternative hedges, with experts recommending diversified portfolios and modest gold allocations.

Nitish Verma
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Cash and Gold Emerge as Alternative Hedges Amid Market Turmoil

Cash and Gold Emerge as Alternative Hedges Amid Market Turmoil

The global pandemic has disrupted the traditional relationship between asset classes, causing US Treasuries, the Swiss franc, and the Japanese yen to lose their appeal as reliable safe havens against market losses. Instead, cash and hide, inflation have emerged as alternative hedges amid rising inflation and market volatility.

Why this matters: The shift in safe-haven assets has significant implications for investors and policymakers, as it affects the stability of global financial markets and the effectiveness of monetary policies. As the search for reliable safe-haven assets continues, it may lead to a reevaluation of investment strategies and a potential reshaping of the global economic landscape.

The divergence in interest rates between the US and countries like Japan and Switzerland has widened, give, back, ground, inflation, expectations, incre. Central bank interventions, particularly by the Swiss National Bank, have further complicated the appeal of these currencies as safe havens. The US dollar has maintained its role as a haven, but concerns over US fiscal deficits and government borrowing could undermine its strength in the long term.

Gold has surged 12% this year, underscoring its role as a contemporary fear gauge and a hedge against asset volatility. Central bank purchases and geopolitical tensions have bolstered gold's appeal, challenging its traditional haven status but confirming its place in modern investment strategies. Experts recommend diversifying traditional 60/40 portfolios with allocations to gold and other commodities, citing its ability to provide a hedge against week, ahead, inflation, data.

Brent Donnelly, president of Spectra FX Solutions LLC, stated, "There are just not many good, liquid safe havens in a time of rising inflation. Bonds don't work, yen and franc don't work. So if you are worried about a lower stock market, the best hedge right now is cash." higher, inflation, could, future, diversification, Jon Adams, chief investment officer for Calamos Wealth Management, added, "Investors have been rethinking about what they considered as safe-haven assets. Fixed income is not protecting your portfolio the same way as before since different asset classes are getting more correlated."

Despite the appeal of gold as a safe-haven asset, some experts caution against investing too heavily in the precious metal. Jaspreet Singh, CEO of Briefs Media and host of "The Minority Mindset Show," advises against buying too much gold, especially in a panic. Singh prefers investing in value-producing assets, such as real estate, stocks, and speculative assets like crypto and startups. While gold has increased by almost 5,000% since 1970, it remains volatile, and household income is growing slower than the price of gold relative to the dollar, making it more expensive to purchase.

As investors navigate the uncertain economic landscape, the search for reliable safe-haven assets continues. With traditional options like US Treasuries, the yen, and the Swiss franc losing their luster, cash and gold have emerged as alternative hedges. However, experts recommend a balanced approach, diversifying portfolios with a mix of value-producing assets and a modest allocation to gold as ainflation, challenges.