A respected Wall Street firm says there is now a “strong case” for gold over bonds, stocks.
CNBC reported that Bernstein is tracking two key measures, both of which are at levels not seen since World War II: global government debt and central bank buying of gold.
The firm argues that the current geopolitical environment is heading toward a period in which neither stocks nor bonds will work, CNBC reported.
"We show that from current equity valuations and from similar points in previous cycles gold and equities give more similar returns ... [to] risk assets such as equities," Bernstein said.
"A material shift in geopolitical risk and a near-record build up in government debt make other potential risk-free assets more questionable and also bring a temptation to create inflation, thereby further enhancing the case for gold," the note added.
Meanwhile, for Azerbaijan’s sovereign wealth fund, nothing beats the safety of gold in a world increasingly vulnerable to trade disputes and geopolitical risk, Bloomberg reported.
Known as Sofaz, the fund is looking to almost double its holdings of the precious metal in 2019 to 100 tons after resuming purchases in 2018 following a five-year break. By contrast, it’s steering clear of larger bets on bonds and especially equities, an approach that Executive Director Shahmar Movsumov says allowed the fund to avoid losses last year.
“We would want to have something that is not someone else’s credit risk,” Movsumov said in an interview in the capital, Baku, on Friday. “In a world where you see the changes in geopolitics, changes in reserve currencies, changes in the dynamics between superpowers and their imminent impact on the financial sector, you want to be on the safe side.”
As a traditional haven in times of turmoil, bullion is seeing a resurgence of demand after the U.S. Federal Reserve signaled that interest-rate increases could be off the table for now. Signs of a global slowdown and the prolonged U.S.-China trade war have added uncertainty to financial markets.
With sentiment toward gold brightening since mid-October, it finished last year with its best quarter since March 2017 as stock-market volatility and a partial U.S. government shutdown also spurred demand.