Remarks
Gold Can Do What Bonds Can’t in a Superlow-Rate World
With central banks propping up debt markets to boost the economy, look elsewhere for diversification.
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In the past decade, a traditional 60/40 portfolio of stocks and bonds, as represented by the S&P 500 index and long-term government bonds, was a winner. But with U.S. bond yields moving toward zero or even negative territory, it may be time to rethink that mix. One thought: How about swapping out some bonds for gold?
In normal times, bonds serve as a hedge against falling stock prices, because they tend to rise in value when equities slump in an economic downturn. But this relationship starts to break down when government bond yields stay down for long periods—especially when they’re low as a result of central bank policy.