Gold: the portfolio differentiator

Gold’s recent rally has drawn broader market attention – but it hasn’t, in our view, detracted from the metal’s qualities as a diversifier.

We see gold as an increasingly important part of multi asset portfolios, backed by long-term drivers. Short-term market corrections may occur, but they can create opportunities to buy.

In our January 2025 publication, Gold: a glittering future?, we highlighted how gold was entering a new era – defined by enduring structural forces: central bank demand, fiscal concerns and a shift away from the US dollar.

We argued that these factors would elevate gold’s role as an alternative to US Treasuries and as a strategic portfolio asset. Almost a year later, those factors have not only materialised – they have defined the narrative of 2025.

In our view, gold’s evolving role within a portfolio has become even clearer. Once regarded primarily as a safe-haven hedge, gold now functions as a strategic asset – an anchor in a world of mounting fiscal and geopolitical risk:

• Low correlation with traditional assets – Gold is a useful diversifier within a multi asset portfolio, given its low correlation with both equities and US Treasuries. Historically, gold has tended to decouple from risk assets during periods of stress, providing protection when portfolios need it most. While equities and bonds can both suffer in inflationary or policy-driven downturns, gold’s performance has often moved in the opposite direction, helping to preserve capital and smooth returns across cycles.
• Value as a “real asset” – At the same time, gold has increasingly behaved as a “real asset” – one that protects purchasing power and benefits from structural change. Unlike Treasuries, whose value depends on nominal yields and fiscal credibility, gold’s intrinsic worth is not eroded by inflation or rising debt levels. In the current environment – marked by political uncertainty, elevated deficits, and the emergence of an AI-driven economic regime – gold has managed to perform well alongside equities, a rare dynamic that reflects its dual identity as both a store of value and a proxy for real assets.

In a multi asset portfolio context, we think there’s a case for raising gold allocations beyond the low single-digit weighting some fund managers assign it.

In line with our positive view, we have raised the weighting of the metal in some of our fund’s more strategic asset allocations in recent years. Reflecting our belief that gold may be a more effective long-term hedge to extreme uncertainty than other traditional safe havens in the current environment, we’ve lowered our allocation to US Treasuries in the same portfolios.

Looking ahead, we anticipate that gold’s strategic relevance will continue to increase into 2026 and beyond. Fiscal imbalances, de-dollarisation, and geopolitical fragmentation are long-term forces unlikely to be reversed quickly. According to the World Gold Council, third-quarter 2025 central bank gold purchases remained strong (28% higher than in the second quarter and 6% above the five-year quarterly average). Short-term technical corrections may occur as speculative positions adjust, especially given the recent rapid increase in investor demand. But we see these as opportunities rather than turning points.

Gold has once again proven its ability to perform in environments where both equities and fixed income face pressure. With traditional safe havens losing some of their protective qualities, gold’s low correlation, real-asset characteristics, liquidity, and intrinsic value make it an increasingly indispensable component of diversified portfolios.

In short, the structural shifts we identified at the start of the year have become the new fundamentals of the gold market. The metal’s recent rally has confirmed our thesis: gold’s rise is not a surprise, but a logical consequence of the changing global financial order and reinforced by a world searching for stability.