Global money manager BlackRock just delivered a double-barreled warning on the merits of holding traditional haven gold right now.

Bullion is proving to be a less effective hedge against moves in other assets, such as stocks, as well as inflation, according to Russ Koesterich, portfolio manager for BlackRock’s Global Allocation Fund. Moreover, gold faces headwinds should the recovery pick up pace, he warned in a blog post.

Gold is “failing as an equity hedge", Koesterich said, noting its positive relationship with risky assets was even stronger when compared with tech stocks. He added: “Gold’s ability to hedge against inflation has been somewhat exaggerated. While it is a reasonable store of value over the very long-term -- think centuries -- it is less reliable across most investment horizons.”

Bullion has lost ground in 2021 as the recovery from the pandemic gains more traction and Treasury yields surge, although the haven has made a partial comeback this week. The typical case for holding the metal in a multi-asset portfolio is that it can help to balance out shifts in other holdings, especially equities. But BlackRock says that right now gold isn’t working well as a hedge against either stock moves or inflation risks, although it was against the dollar.

“Absent a strong view on a declining dollar, I would own less gold,” Koesterich wrote in the March 10 entry, noting that the precious metal was still demonstrating a strong inverse relationship with the US currency. “And for those investors still looking for a hedge, one word: cash.”

Spot gold traded at $1,734.15 an ounce at 2:07 p.m. in Singapore, down more than 8% this year, while a gauge of the US currency has risen about 2%. Among equity benchmarks, the S&P 500 Index has gained almost 4% in 2021.

“While gold’s recent correlation with stocks and inflation has been positive to effectively zero, it is still demonstrating a strong, negative relationship with the dollar,” said Koesterich. “For this reason, gold should probably still be thought of as a dollar hedge.”

As leading economies seek to strengthen the recovery from the pandemic, President Joe Biden’s $1.9-trillion Covid-19 relief bill cleared its final congressional hurdle Wednesday, with the House passing the bill on a 220-to-211 vote. That sends the measure to the president for his signature.

“More stimulus and improving vaccine distribution suggest the possibility of an economic surge,” he wrote. “Should this happen, real rates are likely to continue to rise from still historically depressed levels. As has been the case the past month, this will likely prove a headwind for gold.”