Investment Professionals

After a strong rally in 2019 and 2020, gold traded sideways last year. Stock markets surged higher, and investors priced in higher US interest rates, blunting gold’s allure. When US interest rates rise, the value of the US dollar also rises, meaning it requires fewer US dollars to buy gold. Cryptocurrencies like bitcoin also surged. Crypto poses a challenge to gold, as it gives investors alternative ways to hedge against fiat currencies. As we head into a new year, signs are suggesting things could be looking up for gold. Gold and geopolitics: the safe haven Disruptive geopolitical events usually damage shares and bonds. This is because when turmoil strikes, investors flee risk. The value of bonds and shares are determined by what they’ll do in the future, or by their future cash flows. When investors worry about the future, they naturally ditch assets whose value derives from it. ...

Lesson #1. Gold does well in crises, acting like portfolio insurance Every investor wants an asset that offers downside protection, or insurance of a sort. And preferably one that is not suspiciously complicated or synthetic. Perhaps the major lesson from the coronavirus is that gold can provide this type of insurance as gold historically does well during collapsing equity markets, as the chart below illustrates. Gold has performed well in times of crisis ...