Research

Over the past two months, economic growth has disappointed even as inflation has exceeded expectations. A real risk of stagflation, with rising costs amid lower growth, appears to be on the cards.

This year marks 50 years since the end of gold’s formal link to currency. In the half-century that has passed since this milestone, the world has evolved in ways that were probably unimaginable to the political and economic leaders of that time. As the world has changed, so too has the role of gold. Whereas central banks steadily sold down their gold reserves for several decades after the end of the Bretton Woods system, they have since re-emerged as net buyers of gold for the past eleven years, with emerging market countries leading the way.

Transitory or not, inflation is already impacting consumers

Gold fell slightly during August, down 0.6% in US dollars, on modestly firmer interest rates following strong US jobs data.

As the global economy emerges from an unprecedented shutdown, both policymakers and investors are operating in uncharted territory. To better understand investor strategies during this important transitional period, we interviewed approximately 500 institutional investors around the world about their portfolios, allocations and views on markets, gold and other individual asset classes.

Gold benefits from diverse sources of demand: as an investment, a reserve asset, a luxury good and a technology component.  It is highly liquid, no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time.

Our analysis illustrates that adding between 2% and 10% of gold to an average, Singapore-based institutional portfolio since the onset of the financial crisis would have resulted in higher risk-adjusted returns