The starting point for Investors must always be Asset Allocation.   In some earlier letters, we have written to you recommending you should hold some Gold/Gold Equivalents in one’s portfolio – as Insurance to guard against the “unknown unknowns” of excessive money printing and even as diversification into another Asset Class that is not correlated with Equities.

The argument against holding Gold is that it offers no yield unlike Bonds.  However, with now over USD 13 Trillion of Bonds trading at negative interest rates, Gold, that yields nothing, could be abetter investment for developed world investors than Bonds being subscribed at negative interest rates that are sure to lose Capital on maturity.   

That seems to be playing out with the chart below showing strong correlation between the price of Gold and the cumulative amount of Bonds trading at negative yield. 

And all signs at present suggest more monetary easing to take place in the developed world.  If the correlation holds, Gold prices should move higher.

Solidarity constructs Long only Equity portfolios.  We, therefore, do not hold Gold in partner portfolios

However, from an aggregate Asset Allocation perspective and to protect from tail risk, we would recommend considering some exposure to Gold or Gold Equivalents of 3-5% of your aggregate portfolio.