Gold has surged, breaking above $4,000 per ounce and elevating the precious metal into an incredible $30 trillion asset class.
The real gold price in SDR terms measures gold’s value adjusted for inflation and expressed in special drawing rights (the IMF’s global reserve unit), showing gold’s purchasing power across currencies.
The relationship between gold and inflation held up well in the 1970s and 1980s, but much less so in the 2000s.
Gold once made up a much larger share of global FX reserves. Today, there’s a sharp divide: former gold-standard economies like the US and Europe hold 75%–80% of reserves in gold, while Asian central banks, which built up reserves in the 2000s, hold only 5%–10%.
The industrial-to-precious metals ratio compares the prices of economically sensitive metals (such as copper, nickel, etc.) with safe-haven metals (like gold and silver), serving as a gauge of global growth sentiment. Today, the ratio sits near levels that have historically marked turning points in the global industrial cycle.
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Groupthink is bad, especially at investment management firms. Brandywine Global therefore takes special care to ensure our corporate culture and investment processes support the articulation of diverse viewpoints. This blog is no different. The opinions expressed by our bloggers may sometimes challenge active positioning within one or more of our strategies. Each blogger represents one market view amongst many expressed at Brandywine Global. Although individual opinions will differ, our investment process and macro outlook will remain driven by a team approach.
