Gold down in muted reaction to Russian annexation of Ukraine provinces
Roubini sees a future for gold as an option in the new 60/40 portfolio

(USAGOLD – 2/22/2022) – Gold sold off moderately this morning in a muted reaction to Russia’s military annexation of two provinces in Ukraine and consequent sharply higher energy prices. It is down $1.00 at $1904.50. Silver is up 26¢ at $24.28. Some will see this morning’s tepid reaction as a case of selling the fact, but we should not overlook both metals trading at important psychological barriers – $1900 for gold and $24 for silver. Too, this morning’s sideways pricing raises an interesting question as to how much of gold’s rally over the past three weeks has to do with geopolitics and how much of it has to do with inflation and the impact of future Fed policy. In our view, one has fed off the other in that the invasion is likely to have a significant impact on the price of energy.

Gold price
(30 days)

Chart courtesy of TradingView.com

In an analysis posted on The Mint website this morning, Columbia University economist Noriel Roubini says that inflation will rewrite the rules of investment, particularly the 60/40 rule, i.e., the traditional portfolio consisting of 60% stocks 40% bonds. “The task for investors,” he says, “is to figure out another way to hedge the 40% of their portfolio that is in bonds.” He lists “three usable options for hedging the fixed-income component of a 60/40 portfolio” – inflation-indexed bonds, real assets like real estate and infrastructure, and gold. “Gold and other precious metals,” he says, “tend to rise when inflation is higher.” Gold, he adds, “is also a good hedge against the kinds of political and geopolitical risks that may hit the world in the next few years.”