Diversification And Gold in The Age of Financial Repression
The comments below are an edited and abridged synopsis of an article by Warren Buhai
The coronavirus pandemic has generated a new level of co-ordination between central banks and governments, with potentially profound consequences for the economy and markets.
Up for discussion: Financial repression; developments in 2020; implications; outside intervention in markets is not always a good thing; gold as a diversifier; gold in the age of financial repression; US dollar risk skewed to the downside; and conclusion.
“Looking forward, given the level of interest rates globally, government bonds are unlikely to give investors the same protection as in prior years when interest rates were materially higher. This contrasts strongly with a hard asset like gold, which has proven to be a decent hedge against both equity drawdown risk and central banks pushing interest rates negative in real terms and printing seemingly endless amounts of new fiat money. In the current age of financial repression, it remains prudent as part of a multi-asset solution to consider an allocation to gold (in rand terms).”
