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Gold’s evolving role in asset allocation

One key driver of the rise in gold-backed ETF holdings appears to be increased demand from institutional investment managers. Given the weaker relationship between gold prices and US TIPS yields, which arguably boosts gold’s attractiveness as a portfolio diversifier, this may reflect an increased allocation to gold in their portfolios. But even if that trend continues, we suspect that central banks and private Chinese investors will remain more important influences on gold prices over our forecast horizon.

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