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Blokland’s daily sketch

Blokland’s daily sketch

24-11-2020 | Daily sketch

Has gold lost its shine?

  • Jeroen Blokland
    Jeroen
    Blokland
    Portfolio Manager

The price of gold is down almost 7% since Pfizer announced its Covid-19 vaccine trial results on 9 November. Yesterday, gold fell again after Oxford and AstraZeneca presented solid vaccine news as well. So has gold lost its shine? My guess is not really – at least not now. As today’s chart shows, the price of gold and real interest rates have been highly correlated over recent years. With nominal bond yields being kept artificially low by central banks, increased economic activity will not result in real yields going up. At the same time, inflation expectations are likely to rise – making gold more interesting for investors looking for a store of value. Also, with bond yields so low and bond duration so high, investors will be looking for alternatives for portfolio diversification. Until very recently, the gold allocation of multi-asset mutual funds was steadily increasing. Yet, this does not take away that gold is unlikely to see the same tailwind as earlier this year when real bond yields collapsed.

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As a senior portfolio manager I use charts to illustrate financial issues every day. I tweet my favorites as @jsblokland and was named 'one of the 50 most important people for investors to follow in 2018' by MarketWatch.
Previous editions of the daily sketch can be found on my personal financial markets blog. All graphics provided are collected from Bloomberg data and public websites. They do not always reflect my personal opinion and may also not necessarily reflect the opinion of Robeco. Please cite all references or quote the original source if replicating content.

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