Since the coronavirus sell-off, the top private banks have been gradually shifting their portfolio allocation for the wealthiest 1%, and one of the big winners of this new allocation is gold.
Even though the stock market is bouncing back from the sell-off, the spread of COVID-19 drastically slowed the global economy, which led to doubts about the strength of the underlying economy.
Besides, most bond yields are flirting with negative returns, turning gold and other non-yielding assets into serious competitors for capital allocation.
Therefore, private bankers are advising their clients to increase their exposure to the yellow metal in this post-COVID financial world. UBS, the world’s biggest wealth manager, forecasted that gold would hit $1,800 by year-end as their most likely scenario [Editor's note: gold was even closer to $1900 at the end of December 2020].
The ultra-wealthy see the endgame of capital allocation with a different lens, as explained by Lisa Shalett, Chief Investment Officer, Wealth Management at Morgan Stanley: "[They are] very concerned about wealth preservation. And in many ways, they have a longer historic lens than some of our other clients, so they do worry about inflation."
As most portfolios used to lack precious metals, this shift towards gold is a real game-changer in the world of private banking and wealth management.