The stage is set for gold to shine as the bullion makes an ideal hedge for stubborn inflation, according to Bank of America. "That rare thing, an uncorrelated anti-stagflation hedge," Jared Woodard, the firm's investment and exchange-traded funds strategist, said of gold. "Gold is worth owning for the times when financial assets offer negative real returns." The Wall Street firm on Wednesday initiated coverage of gold ETFs with a "favorable" view.
Bank of America said the precious metal has become particularly appealing as the opportunity cost of financial assets dips. "When corporate profits are falling, bonds are overpriced, cash lags inflation, and major currencies are leaking value, the anti-speculative intransigence of gold is a feature," Woodard said. "When the opportunity cost of missing out on stocks and bonds is low, the gold price gets high.
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