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HSBC Cuts Gold Allocation on Outlook for Weaker Economic Growth

HSBC Bank Plc reduced gold’s weighting in its strategic portfolio, citing an outlook for weaker economic growth and slow inflation.

HSBC lowered its bullion allocation to 4 percent in its three-year-view portfolio, compared with 7 percent in July, Fredrik Nerbrand, the bank’s London-based global head of asset allocation, said today in an e-mailed report. It also gave commodities a smaller allotment. HSBC left gold’s weighting unchanged at 5 percent in its six-month-view tactical portfolio.

“We cut our weights to gold and commodities, as both appear to be poor strategic investments given the economic outlook,” Nerbrand said. Raw materials and gold “are likely to face headwinds given the slower emerging-market growth rate and continued weakness in developed markets.”

Gold tumbled 16 percent this year as U.S. inflation remained below the Federal Reserve’s 2 percent target rate. At the same time, prospects for an economic recovery raised speculation the central bank would slow bond-buying that helped the precious metal cap a 12-year bull run in 2012.

“Less accommodative monetary policy, weak growth and low inflation will conspire to generate low returns across asset classes,” Nerbrand said.

HSBC cut the weighting for commodities in its three-year-view portfolio to 3 percent, from 6 percent a month earlier, according to the report. The bank said its strategic position is now in an overall commodity index, instead of investments in individual raw materials.

To contact the reporter on this story: Whitney McFerron in London at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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