We find that gold has provided downside support during periods of heighted volatility or increases in systemic risk. This safe haven attribute, when combined with gold’s independence from any central bank, means that gold exhibits its own unique characteristics that provide potential benefits to a diversified portfolio. While we note that gold has traditionally been considered an asset with both inflation and deflation hedging benefits, most of the major test cases for this occurred either when gold’s price was pegged to the dollar or during the collapse of the Bretton Woods system, making it difficult to rely on historical data. Still, our view is that many portfolios would benefit from having a strategic allocation to gold, particularly in a world that appears poised to experience persistently low real interest rates.
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