DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Gold remains positioned to benefit from the debasement trade despite its recent weakness, according to market strategists at HSBC Asset Management. Yet the metal’s failure to protect investors during recent stock market pullbacks offers a sharp warning against depending on one asset during periods of stress.

“Gold’s spectacular bull run, which saw prices climb to well above USD5,000 per ounce earlier this year, has fizzled out,” the strategists said. Prices have since declined while volatility has increased.

Gold underperformed following its rally earlier in the year as oil prices surged, interest rates rose and bond yields climbed. Even so, HSBC sees a compelling strategic role for the metal as geopolitical fragmentation and central bank reserve diversification continue supporting demand.

“The ‘debasement trade’ of shifting capital into ‘hard assets’ such as gold can continue as concerns over debt and inflation linger,” the strategists wrote. They also said the recent increase in volatility does not look especially severe when measured against history.

The immediate problem is that gold has not operated as an effective hedge against equity drawdowns. HSBC said leveraged capital had crowded into the metal, leaving investors under pressure to unwind positions and raise cash when falling stocks triggered margin calls.

That market behavior means gold may remain a robust hedge against systemic risks in a multipolar world without reliably cushioning portfolios from short term volatility. HSBC said the episode demonstrates why investors should diversify the assets they use for diversification.

In July, HSBC said gold could continue rising through the end of 2026 despite higher Treasury yields and a stronger dollar. The bank cited portfolio diversification demand, central bank purchases and ETF inflows as sources of support.

HSBC Global Chief Investment Officer Willem Sels and Global Head of Wealth Insights Lucia Ku said gold had not rallied during the Middle East conflict and had largely moved alongside equities. Their analysis identified U.S. Treasury yields as the primary force driving gold prices.

When yields rise, investors face a higher opportunity cost for holding an asset that produces no yield. Elevated real yields and a stronger U.S. dollar could therefore keep gold rangebound in the near term, according to their assessment.

Sels and Ku also said gold had become less effective as an equity hedge in 2026 because it had largely tracked stocks. Nevertheless, they continued to view the metal as an effective diversifier against broader portfolio risks.

Their bullish medium term view rests on continuing demand for diversification, purchases by central banks and steady ETF inflows. HSBC also anticipated additional upside for gold by year end.

James Steel, Chief Precious Metals Analyst at HSBC, offered another view in May, saying gold had performed exactly as it should during the Iran conflict. He pointed to strong Chinese demand and a Shanghai Gold Exchange premium of around $20 over the global price.

Steel said demand in China was concentrated more heavily among institutions than in jewelry, coins and small bars. He connected that shift to regulatory reform allowing top insurance companies in China to accumulate bullion, while asset managers in India were also permitted to accumulate it.

Discussing gold’s peak near $5,400 per ounce in late January and its subsequent decline, Steel described the advance as somewhat robust. He said substantial amounts of money had entered from investors who had not participated in gold for a long time, or had never traded it.

Steel said the market may have become overly long, particularly based on CFTC data and other available indicators. He rejected claims that gold’s decline following the strikes on Iran and escalating oil prices proved it had failed as a safe haven.

In Steel’s account, higher oil prices revived inflation fears while bond yields and the dollar rose and equities declined. Investors needed ready cash, and gold provided it, leading to liquidation as a reaction to financial market pressure.

Steel also said gold’s relationship with oil had changed substantially. The two rose together during the 1970s and fell together during the 1980s, but that relationship began breaking apart in the 1990s as oil became less significant to the global economy.

That correlation is now around 0.15 and can turn negative, according to Steel. He described gold as a distinctive alternative asset because it combines the characteristics of a hard asset with deep liquidity, allowing investors to sell it quickly when cash is needed.

Steel contrasted that liquidity with assets such as Canadian farmland, which cannot be liquidated quickly. He also said many asset managers that previously excluded gold are beginning to add it while searching for alternatives, reinforcing its portfolio role even as its limits become harder to ignore.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.