* HSBC favours TIPS over gold as inflation hedge
* Cuts gold price forecast in a recession to $1,600/oz
By Clara Denina
LONDON Jan 24 HSBC halved the allocation of gold
in its strategic portfolio in favour of equities and treasury
inflation-protected securities (TIPS) to reduce volatility, the
bank said in a report, taking a much less favourable view of the
metal as an inflation hedge.
The bank cut gold's weight in its 3-year strategic portfolio
by 8 percent to 7 percent and by 9 percent to 7 percent in its
As the relationship between gold and U.S. inflation has
slightly broken down over the past year, HSBC now sees TIPS
providing a more reliable hedge against inflationary pressures.
Although economic headwinds remain, with ongoing U.S. debt
ceiling negotiations and euro zone growth woes, major tail risks
that the global economy faced at the start of 2012 have
retreated considerably, it said.
The bank said it no longer views gold as a "sound
investment" should the global economy fall back into recession,
as this would not now be driven by a major systematic event such
as a sovereign default.
"Given the much lower risk of such a disaster taking place,
we now forecast that the gold price would fall to $1,600 an
ounce in a recession rather than rising to $2,200 (as previously
forecast)," it said.
"This change means that we now expect gold to return -3.6
percent in a recession rather than the 32 percent that we
forecast back in September," it added.
A Reuters poll published earlier this week showed that gold
could see record average highs this year and next, but its
12-year long bull run may be reaching a plateau.