Gold Fails as Equity Hedge but Debasement Trade Endures, HSBC Says

HSBC Asset Management strategists point out that gold keeps benefiting from the debasement trade due to debt and inflation concerns, despite its recent weakness. The metal has not shielded portfolios from equity drawdowns, as leveraged positions trigger margin calls. Prices climbed above $5,000 per ounce early in the year but later declined amid high oil prices, rising rates and bond yields.

Geopolitical fragmentation and central bank reserve diversification still support demand for gold. Volatility stays manageable versus historical levels, yet investors are advised against relying on any single asset. US Treasury yields act as the main price driver, so gold is expected to stay range-bound near term, with upside potential by end-2026 from ETF inflows and central bank buying.

Experts including Willem Sels and James Steel stress the need for diversification and gold’s role as insurance in turbulent markets, although its correlation with oil has weakened.