While not entirely our base-case scenario, there are arguments to be made for holding gold counters in the current market environment. To understand why, we should look at the history of monetary policy and gold over the past century and be mindful that gold tends to perform well during periods of expansionary monetary policy, a high inflationary environment and equity market corrections.
Initially, all currencies were backed by gold through a form of monetary policy known as the gold standard. However, the demands of the two world wars made it impossible for many European countries to abide by these stringent requirements. To alleviate this burden, the Bretton Woods system was introduced whereby all currencies have adjustable (by government decree) exchange rates with the US dollar, while the dollar was pegged to a $35/oz gold price...
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