Goldman's Case for Pensions to Buy Gold Not Bonds— "The 60/40 is Dead"

Contents (1400 words, 16 slides)

1. Portfolio Breakdown Begins with Policy Failure
2. Two Assets,Two Risks
3. Gold Is the Core Hedge
4. Oil Is Still a Hedge—But With Limits
5. Proof: Two Investor Profiles, Same Conclusion
6. Final Thought: Gold as Neutral Collateral
7. Appendix

Intro: Breaking the Seal

Authored by GoldFix, ZH Edit

The Precious Metals and Energy analysts at Goldman Sachs Daan Struyven, Lina Thomas, Samantha Dart have overtly taken a step to recommend replacing a portion of Bonds in the previously dogmatically adhered to 60/40 stock-Bond portfolio mix. This is not a short term trade idea, nor is it one of those macro “plays” the market has seen so much of these past two years. This is a call to change how Pensions and the largest institutions allocate big money to hedge equity risk. As such, it is (to our eyes) the very first shot across the bow for global money managers to take heed on how they’ve been allocating client money on autopilot for the last 15 years.

Put another way: Sovereign entities like Central Banks started replacing Bonds with Gold more aggressively when the Ukraine war started. Now, privately held institutions have begun following that lead. This charts below serve as a reminder of how far gold has yet to go in terms of broadening reinvestment.1 We have much more to go in restoring Gold as a proper asset for global financnail health.

On that note, this analysis is must read for those seeking the road map laid out for pension asset allocators for the next 5 years. This could (should) be the next tailwind to underpin and drive gold relentlessly upwards to where it belongs in the pantheon of assets.

 

Portfolio Breakdown Begins with Policy Failure

When bonds stop working, the portfolio model must change. The traditional 60/40 equity-bond allocation2 failed twice in recent months—once during tariff-induced recession fears, again as long-term borrowing costs surged on fiscal sustainability concerns. In both cases, U.S. Treasuries failed to offset equity drawdowns.

The analysts revisit a core idea: diversification must extend beyond stocks and bonds. They argue that gold and oil, properly weighted, serve as structural hedges in a world where inflation, policy error, and commodity supply risks frequently overlap. Their horizon is 5+ years.

The failure of bonds to provide protection has triggered a rethink of how real assets are integrated into portfolios. The 60/40 construct assumes that equity and bond risks are negatively correlated particularly during downturns. But in an era where inflation shocks are increasingly tied to fiscal overreach and geopolitical instability, this assumption no longer holds.

Two Assets, Two Risks

“Inflation shocks now come from both fiscal overreach and commodity scarcity. Real assets are no longer optional.”

Gold and oil hedge against different shocks. Gold protects against the erosion of institutional credibility—fiscal overreach, political interference with the Fed, declining trust in sovereign bonds. Oil, by contrast, guards against inflation from supply shocks—scarcity, war, embargoes, and energy bottlenecks.

During any 12-month period where both stocks and bonds posted negative real returns, either gold or oil provided positive real returns. That’s the foundational empirical case. Portfolios need protection from dual-front inflation—and that means real assets.

History bears this thesis out. The 1970s featured runaway inflation fueled by fiscal expansion and energy disruption. The 2000s saw monetary excess and commodity spikes. And most recently, 2022 brought policy whiplash form pandemic-era stimulus, colliding with supply-side dislocations following the Ukraine war. In each instance, traditional assets failed simultaneously—while gold or oil held their ground.

Gold Is the Core Hedge

“Even a modest reallocation from Treasuries or equities into gold could trigger a steep repricing.”

The authors favor a long-term overweight in gold. Two reasons:

1. Credibility risk is rising — U.S. debt-to-GDP is climbing, and political rhetoric is encroaching on central bank independence. When credibility erodes, both equities and bonds sell off.
2. Central bank demand is structural — After Russia’s reserves were frozen, central banks—especially in emerging markets—accelerated gold purchases. Unlike FX reserves, gold held domestically cannot be seized.

The gold market is small. If even a modest reallocation occurs from Treasuries or equities...

Continues here with special audio commentary