Can base metals provide a solid hedge against inflation? – Natixis
According to Bernard Dahdah, Research Analyst at Natixis, base metals are more responsive to changes in CPI than precious metals and although energy has the highest inflation beta, it does not have the highest correlation and can be volatile.
“Holding a broader basket of commodities can reduce the specific risk associated with a single asset (or group of assets) and increase the correlation with CPI, which itself is driven by prices in the broader economy.”
“Aside from serving as a hedge against inflation, low correlation (<0.3) between commodities and traditional asset classes should reduce overall portfolio volatility and improve the risk-adjusted returns.”