Gold is poised to go 'much higher,' says BlackRock's Koesterich

Gold is one of the few good hedges right now, and that means it is poised to go "much higher," BlackRock's Russ Koesterich said Tuesday.

With bond yields falling around the globe, investors have been flocking to the precious metal. Gold is up about 28 percent year to date.

"The reality is we are in an environment where the economy is slow, volatility is likely to be heightened. In that volatility, you need some hedge in your portfolio and there are few of them that work as reliably as gold," he told CNBC's "Closing Bell."

Because gold produces no income, there would be a huge opportunity cost if investors had a lump of gold in their portfolio when real rates are high, he said. However, with real rates low and increasingly negative, the opportunity cost is much lower — which makes gold a more reliable hedge, he explained.

"Gold is an effective hedge, not just against equity risk but also against credit risk and in an environment in which real rates are low and now increasingly negative, gold does an even better job in that role," he said.

The head of asset allocation for the BlackRock Global Allocation Fund also said he would be overweight equities to bonds. When it comes to investors getting income in their portfolios without overpaying, he believes things like credit and preferred stocks "start to look more interesting."