Bob EliotCo-founder, CEO and CIO of Unlimited fundshas pointed out that the market movements in 2022 and this month are a good reminder of the Diversifying gold value in a portfolio.

What happened: Elliott said gold has outperformed in a month when financial assets as a whole have performed poorly and bond yields have risen. Similarly, the yellow metal has outperformed in a year when financial assets have performed poorly and bond yields have risen, he said in a tweet.

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“Gold is not interest-bearing money so it should do poorly when interest rates rise and does so in volatility,” Elliott tweeted, adding that the reason it hasn’t fallen over time is because it also serves as protection serves when tailing scenarios are increasingly priced in, including very high or very low inflation.

He argued that these types of scenarios are more common than most investors realize. “However, hardly any investor holds reasonable allocations to gold. Market action this year and month is a good reminder of the diversifying value of gold in a portfolio,” Elliott said.

The price of gold has been on an upward path since the end of October. That SPDR Gold Trust GLD has gained 3.18% in the last month while the iShares China Large Cap ETF FXI has increased by over 4% during this period.

Responding to a Twitter user about gold’s price action during the 2008 financial crisis, Elliott said that gold selling by developed central banks in the late ’90s and early 2000s gave the yellow metal a lot of structural weight for a time. It ended in 2007 and the price went up after it stopped, he said.
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