Real yields drive gold higher

Gold has been an important allocation within our asset mix for the last 12 months, delivering excellent returns and diversifying risk during the #COVID pandemic. We view gold as a zero coupon, long duration, store of value with unique attributes.

Gold prices have moved in lock-step with real yields (the expected after inflation return on Government bonds) for some time now, however in a period of financial repression and money printing there is scope for gold to continue generating returns beyond this one relationship.

A closer look at our #evidencebased gold indicators shows that trend is unsurprisingly positive, and that a meaningful weakening of the US Dollar, signs of life in emerging markets or a breakout above the US$1,800 level could take us back to our maximum 25% exposure from the current 15%.