Gold: valuable reserve amid unprecedented policy environment

Published 22nd November 2016

Categories: Reserve asset management

Download (pdf, 1.64 MB)

Unprecedented monetary policies (including quantitative easing and negative nominal interest rates) have had the unintended consequence of dramatically reducing the pool of investable assets available to reserve managers. As central banks search for new investments, our analysis shows that gold compares extremely favourably to other traditional reserve assets with respect to safety, liquidity and return.

Safety, Liquidity, Return...

  • Safety: As a high-quality, liquid asset, gold helps preserve capital, diversify portfolios, mitigate risks, and serves as valuable collateral
  • Liquidity: Operating in large markets that rival those of major sovereign bonds, gold is one of the most highly traded financial assets, with low transactional costs and universal acceptance
  • Return: Since 1997, the average annual return on gold, in US dollar terms, has consistently outperformed the average returns on US Treasuries, Eurobonds, Japanese government bonds, and UK gilts over 10-year, 5-year and 1-year time horizons.