Enhancing the Wealth of Nations: Gold and Sovereign Wealth Funds

Published 27th September 2017

Categories: Investment, Central banks/official inst.

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Sovereign wealth funds, like many other investors, are under pressure to generate returns in a low-yield, low growth environment. Many are expanding into alternative assets to seek growth and income opportunities. Despite this, few sovereign wealth funds have invested in gold due to ongoing misconceptions about gold’s performance, financial behaviour, and liquidity.

However, gold has unique qualities that can meet the needs of sovereign wealth funds. It features a long-term pro-growth trajectory without sacrificing its short-term diversification and safe haven characteristics. It has virtually no correlation with funding sources like oil, while continuing to be one of the world’s most liquid asset classes. As a new era of uncertainty dawns on global markets, the evolving nature of gold promises to give it a pivotal role in enhancing the wealth of nations.

Read our report on gold and sovereign wealth funds here.

Gold’s long-term performance compared to other financial assets

Based on total returns indices including MSCI US, MSCI ACWI ex US, JP Morgan 3-month US cash, BarCap US Bond Aggregate, Bloomberg Commodity for 10- and 20-year average, and S&P Goldman Sachs Commodity since 1971 due to data availability. Gold performance based on LBMA Gold Price. Data between January 1971 and December 2016.

Source: Bloomberg; ICE Benchmark Administration; NBER; World Gold Council