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General Market Commentary
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General Precious Metals
World Gold Council: Should gold replace bonds as the world’s safe-haven?
The Federal Reserve appears to be in a holding pattern, but only after lowering interest rates for the third time in July. In this low interest rate environment, investors should be looking at gold as a replacement to bonds, according to the World Gold Council (WGC).
In a report published earlier this week, analysts at the World Gold Council said that investors should look at increasing their exposure to gold by 1 to 1.5% as part of a diversified portfolio.
“A lower rate environment may make gold more effective than bonds in mitigating stock-market risk, providing portfolio diversification and helping investors achieve their long-term investment objectives,” the analysts said. “Bonds usually make up a significant proportion of portfolios, and while it may not be feasible for investors to fully replace all bond exposure with gold, the environment warrants consideration of augmenting gold holdings.”
The council noted that when adjusted for inflation, 82% of all global bonds have a negative real yield, which has helped boost gold’s attractiveness as opportunity costs have almost completely vanished. The analysts added that gold also looks attractive as confidence continues to erode among major fiat currencies amid growing deficit issues.