Why we chose to buy gold – aka ‘TIPS on steroids’
“Yet, as we have detailed, government bonds are at extreme level vs. history, to the point where many are negative yielding – this means that if held to maturity an investor will not receive their capital back. The dollar has also become expensive and even gold has risen over 25% in 2020. Normalisation in a post-covid-vaccine environment would further increase risk of ‘reflationary’ factors in economies and markets. Neither the $ nor government bonds would perform well in this setting but gold can still play a role here. This is because gold is a multifaceted financial asset. It can continue to play its role as an inflation-protected-bond proxy but can also play its ‘commodity price’ role if real yields and inflationary expectations do begin to normalise. Finally, it can play its role as systemic hedge if there are structural interruption to markets via geopolitical crisis.”
USAGOLD note: That about summarizes the case for gold as an investment for all seasons …… Nutmeg is a London-based investment fund with $2.6 billion under management.
Repost from 10-15-2020