GoldNuggets — Gold Asset Allocation
Valuations — Gold vs Stocks
Interesting to note that both Gold & Stocks look expensive by my indicators: “I thought this one interesting as aside from both gold and stocks looking expensive, the two have been riding similar waves over the past few years; hinting that the liquidity/debasement trade is the dominant force here“ $Gold - main 2512(GCmain)$ $S&P 500(.SPX)$
Gold/Stocks/Bonds — Rolling 3yr Returns
Taking a look at rolling 3-year annualized returns for gold, stocks, and bonds, you can see that in the past ~5 years gold and stocks have been tracing a similar path (which is historically unusual — they have more often in the past tended to be uncorrelated vs positively correlated like this).
You can also see the historically unusual negative returns for bonds, and how the past few years have seen seismic shocks for traditional asset allocation.
Gold Price Relative Performance
With gold and stocks traveling a similar path it makes this chart make more sense (gold outperforming vs cash and bonds, but in a range trade relative to stocks).
Gold vs Bonds — Valuations
That’s the past, what about the future? In terms of diversification for asset allocators going forward, with bonds back to cheap and gold expensive, if I had to guess I would say that bonds will return to their role of diversifier.
But the key lesson from all this is to diversify your diversifiers (some gold, some bonds) and to diversify discerningly (sometimes gold, sometimes bonds); paying attention to valuations, macro regimes, and cycles.
Precious/Industrial Metals
I’ve often described silver as having more in common with industrial metals than gold (or being a combination of both), but this chart helps hammer that point home with a look at how the GSCI Industrial Metals index tracks vs gold and silver prices over time.
You can see that although silver traces a somewhat similar path to gold, it moves more in common with industrial metals. For what it’s worth I think there is a decent chance industrial metals see catch-up/rotation as global growth likely improves later this year on the back of monetary tailwinds.
One to keep an eye on (alongside the commodity rotation theme).
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