Navigate political risks

The precious metal has been the standout performer of 2025 so far. Purchases of exchange-traded funds (ETFs) have increased, alongside ongoing central bank demand. This has propelled gold ahead of the euro as the world’s second largest reserve asset after the dollar, according to the ECB. Although gold has pulled back slightly from record highs amid optimism that the worst of the trade war is over, we remain constructive on bullion’s long-term value. We expect gold prices to remain supported by declining real interest rates, a weaker US dollar, elevated geopolitical risk premia, and a structural shift in institutional buying. For example, central banks have accumulated over 1,000 tonnes of gold in each of the past three years—more than double the average annual pace of the previous decade, according to World Gold Council data.

For capital preservation in equities, investors can consider strategies that combine a zero-coupon bond with a call option, helping manage downside risk while retaining upside potential. Elevated interest rates make the bond component less expensive, increasing participation in equity gains. However, higher volatility can raise option costs, so investors should keep this in mind. While factors like US budget negotiations, geopolitics, and growth concerns could drive further volatility, the influence of tariff uncertainty—which had been significant—is now subsiding.

Hedge funds can serve as valuable portfolio diversifiers and geopolitical hedges, through global macro trading, marketneutral equity strategies, or multi-strategy platforms. See the following section on alternatives for more detail on our hedge fund views.