Dec 09, 2022
Gold as an asset class has a lot speaking in its favour right now. First, it can be a recession hedge as shown impressively in the graph below of the gold to crude oil ratio. Then it is an inflation hedge due to its scarcity. Its status as a trusted store of value is even reinforced by the recent trouble in cryptocurrencies. From a European perspective, its USD denomination also helps. Lastly, geopolitically, Russia’s decision to link gold to oil could bring gold back as a settlement medium and increase demand further. At ECP, we like gold despite the fact it does not generate cash-flows or interest and it is part of asset allocation. It is not only the central banks that are buying gold right now.