Fidelity: Global Macro Insights: The role of gold as a safe haven in a fragmenting world

Gold has come back into focus as investors are questioning whether bonds can cushion equity drawdowns to the same degree as they have in the past. In this paper, we examine whether and how gold can contribute to portfolio resilience alongside traditional assets, and under what conditions that case strengthens or weakens.

Key takeaways

• Defence needs a rethink: Higher inflation volatility, a more fragmented geopolitical backdrop, and more variation in the causes of market stress have weakened the reliability of bonds for protecting portfolios against equity drawdowns. A dynamic allocation to a range of defensive assets may be necessary to achieve portfolio resilience.
• Constructive case for gold: Given current conditions, an allocation to gold could help improve diversification by increasing the range of shocks a portfolio can absorb without materially altering overall risk, as part of a broader defensive toolkit.
• Cyclical drivers still matter: Real yields and the US dollar remain key drivers of gold returns. Gold has tended to perform best when real yields fall and the dollar weakens.
• Structural support has strengthened: Reserve diversification, firm official-sector demand, and a more supportive flow backdrop have underpinned gold in recent years, helping explain gold’s resilience even when cyclical signals are less favourable.
• Look past spot: Gold appears expensive on simple historical comparators, but these are better treated as reference points than as valuation models. The persistence of macro and flow drivers matters more than static benchmarks.
• Implementation is critical: Higher volatility and shifting correlations mean any allocation should be sized carefully, funded clearly and managed with disciplined rebalancing.

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