The World Gold Council shows that pension funds are already allocating 5% to gold funded by selling bonds
How Pension Funds Make Room for Gold
Authored by GoldFix
When stocks and government bonds fall together, a pension fund takes losses on both sides of the book. Several funds already hold gold to provide another source of diversification.
The Bond Hedge Has Become Less Reliable
We would judge the bond hedge by its behavior when equities sell off. Chart 3 tests that relationship using weekly returns from January 1994 through June 2026. When US stocks fell by more than two standard deviations, gold’s equity correlation was negative and the Treasury correlation was positive.
WGC describes the trade:
The study was undertaken during a period in which nominal interest rates on German government bonds had fallen to negative levels, including at longer maturities. According to DPS this raised questions about the role of such investments in the portfolio. The study also identified inflation as a concern in light of policy responses to the pandemic, including rising debt levels and money supply.
Against that backdrop, the Pensioenfonds PDN board funded an investment in a physical allocation to gold by a 10% reduction in the fund’s exposure to government bonds: half of the proceeds were allocated to gold and the remainder to equities, real estate and infrastructure.
DPS reported lower expected portfolio risk without lower expected returns. The note supplies no subsequent performance comparison for that allocation.
Goldman Sachs is urging pension funds to replace a portion of their bonds with gold as Treasuries struggle to protect portfolios when stocks fall.
Fairfax Uses Futures Within a Risk-Balanced Portfolio
Continues here
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