CIO thinks investors should add gold to portfolios as a source of return and as a portfolio hedge. (UBS)

Gold prices edged lower in May and June as the Fed again turned more hawkish.


  • After testing historical highs in early May, gold prices declined for two straight months, falling to as low as USD 1,892/oz in June.
  • International Monetary Fund data shows official gold reserves declined by 71 metric tons in April, the first net decrease in over a year.
  • Resilient labor and sticky inflation are widely seen leading the Federal Reserve to hike another 25bps in July.

But as inflation begins to ease off, gold is again on the rise.


  • US headline CPI slowed to 3% in June, the smallest increase since March 2021, rekindling hopes the Fed hike cycle could soon end.
  • The Federal Reserve may have another hike or two to go, but we think it is closer to starting an easing cycle than its peers like the European Central Bank.
  • Gold's relative performance versus the S&P 500 has historically improved significantly during US recessions—a key risk to monitor this year.

So we see reason to position for more upside in the months to come.


  • We expect gold prices to rise and hit USD 2,100/oz by end-December and USD 2,200/oz by end-March 2024.
  • We think investors should add gold to portfolios as a source of return and as a portfolio hedge. We also think selling downside risks in gold can be an additional source of portfolio income.
  • Gold tends to benefit from safe-haven inflows on geopolitical strife. Both the war in Ukraine and US-China frictions do not have a resolution in sight.

Did you know ?


  • Gold is typically negatively correlated to the US dollar, as a weaker USD reduces the relative cost for foreign purchasers.
  • Gold tends to have a low correlation with traditional assets, with considerably less exposure to business cycles because of its low use in industrial applications (below 10%of total) and significant jewelry purchases driven by Chinese and Indian demand.
  • Longer-term trends suggest no reduction in gold appetite among central banks—which have made net purchases of the precious metal for 13 straight years.
  • 85% of more than 140 central banks and sovereign funds polled by Invesco predict inflation will be more elevated in the decade ahead than the prior one.

Investment View


We think investors should add gold to portfolios as a source of return and as a portfolio hedge. We also think selling downside risks in gold can provide an additional source of portfolio income.


Main contributors - Jon Gordon, Wayne Gordon, Giovanni Staunovo


Original report - Can gold resume its climb?, 17 July 2023.