One of the factors suggested to explain the rise in bitcoin’s price is that it is becoming the investment of choice for businesses and wealth management (family offices, multimillionaires). True, but isn’t this part of a more global phenomenon that includes gold? This is explained in an interesting article in Echos: “Gold increasingly popular in investor portfolios”.
According to BNP Paribas AM manager Fabien Benchetrit: “The correlation between equities and bonds is less effective at cushioning shocks, and we need to find an alternative asset to play this role. Gold is one of the diversification tools that can meet this need”. Traditional portfolios, divided between equities and bonds, are less resilient to economic shocks than they used to be, as the two assets increasingly react in tandem, reducing their diversification and resilience. Another asset must therefore be included: physical gold.
According to Julien Dauchez of Natixis IM, major financial institutions “now favor a very slightly alternative model to the 60-40 model we’ve known for decades, 60% in equities, 40% in bonds. These institutions are announcing the arrival of a 50-30-20 model, that’s 50% in equities, 30% in bonds and 20% in alternative assets”, with the latter tranche made up mainly of private assets, (unlisted assets such as private equity, real estate funds, infrastructure funds, private debt) but “increasingly of gold”.
Gold, of course, has the immense advantage of being perfectly liquid, unlike unlisted assets, which are very rigid and difficult to sell, and whose value can plummet in the event of too many sales or a liquidity crisis.
According to the Natixis IM manager, this phenomenon is also found in private asset management: “In the allocation proposed by asset managers or private banks in Switzerland or Germany, gold has always been significant, which contrasts greatly with the United States or even France. But overall, the investment in gold is increasing everywhere. In Switzerland or Germany, it will rise from 8% to 11%, or even 12%, while in France, it will increase from 2% to 4%”. From 2% to 4%: it’s going up, but why the timidity in France? But don’t forget your life insurance!
And gold will continue to do well, for two fundamental reasons according to these managers:
- High real interest rates in 2024 did not prevent it from posting one of the biggest price rises in its history. As Fabien Benchetrit explains: “Real rates are no longer the key variable in gold’s appreciation. Geopolitics is now the determining factor. The shift from a peaceful, U.S.-dominated world of free trade and easy access to resources, to competition between powers and unstable supply circuits is creating tensions that justify the high geopolitical premium in gold prices.”
- Central banks will continue to buy gold, as emerging countries, notably the BRICS, gradually de-dollarize. Their dollar reserves are gradually migrating to gold, the best alternative.
This is very encouraging. The price of gold has every reason to continue progressing.
