Dear Ladies & Gentleman
Gold is on the rise again, as the market debates whether inflation will be transitory as economies recovery post-COVID. Extreme volatility among cryptocurrencies like Bitcoin has also benefitted gold in Q2. Gold mining stocks are enjoying renewed activity as market participants recognize the free cash flow and profit potential this sector offers.
- Although gold continues to be underrepresented in portfolios, we are seeing a growing interest among institutions looking to replace bonds
- Gold is being supported by several macro tailwinds, including negative real rates, rising inflation and exploding government balance sheets
- Bonds are at a dead end as a portfolio diversifier for 60/40 portfolios…with negative real rates, they offer minimal upside combined with substantial downside risk
- Gold mining stocks continue to be inexpensive relative to gold bullion and cheap by any standard valuation metric