Central bank buying

As the price of gold has risen by 28.6% in USD terms in 2024, we believe the primary driver of this increase is heightened central bank purchasing. The renewed emphasis on gold as a strategic reserve may be fueled by inflationary concerns and the desire of non-U.S. central banks to reduce their dependence on the U.S. dollar as a reserve currency. Geopolitical tensions, coupled with the elevated U.S. sovereign debt level, could also be contributing factors. Furthermore, central banks appear hesitant to hold cryptocurrencies, which may make gold more attractive.

Despite these developments, we remain cautious in allocating to gold in the portfolios we manage. Like cryptocurrencies and other commodities, gold does not generate cash flows during the holding period, which limits its long-term investment appeal for our portfolios.