The golden rule returns

Gold is no longer reliably diversifying because higher real yields and changing investor flows have turned it into a risk-sensitive asset.

• Gold has fallen more than 25% from its January 2026 peak but remains up over 70% over the past two years.
• Since 2022, official central-bank purchases have averaged more than 1,000 tonnes annually, twice the rate of the previous decade, as emerging-market institutions reduced reliance on US Treasuries and the dollar.
• The post-Iran-war oil shock pressured emerging markets: Turkey sold a significant share of its gold reserves in March, while India more than doubled gold-import tariffs in response to the energy crisis.
• Institutional investors sold as oil-driven inflation fears pushed bond yields higher; strong US data, Federal Reserve Chair Kevin Warsh’s anti-inflation stance and reversed speculative positioning further weakened gold.
• Gold’s beta to US yields is at a five-year high, while its beta to the S&P 500 has reached its highest level in 40 years as equities and bonds remain positively correlated.

Takeaway: Ruffer still views gold as a strategic real asset and retains gold-mining equities, but considers bullion’s current portfolio risk unattractive and says low exposure is prudent after reducing its gold allocation consistently since spring 2025.