Gold surged past $3,200 an ounce on Friday, setting another record high—and according to BlackRock, it’s emerging as a more reliable hedge than Treasurys in today’s volatile environment.
Wei Li, BlackRock’s global chief investment strategist, said in a LinkedIn post Thursday that the current market regime has turned several long-held relationships on their head. “Also not normal—risk off, dollar and Treasuries down,” she wrote. “I will keep saying it: gold is a better diversifier than Treasuries in this environment of high debt.”
Her comments come amid a sharp sell-off in U.S. government bonds, triggered by renewed investor fears that President Donald Trump’s escalating trade tariffs could have lasting effects on global supply chains and inflation. The 10-year Treasury yield climbed to nearly 4.4% on Friday, continuing its upward march this week as bond prices fell.
For decades, Treasurys have anchored portfolios as a safe haven in times of stress, providing ballast when equities tumble. But that assumption is being tested. In recent sessions, bond prices and the dollar have both fallen even as investors sought safety—an unusual pattern that highlights how shifting macro dynamics are reshaping traditional correlations.
The dollar has weakened notably through the turmoil, sliding to a three-year low against the euro and a 10-year low versus the Swiss franc. In a post earlier this month, Li characterized the trend as a sign of a “new regime” defined by persistent inflationary pressures and elevated sovereign debt. “In this regime,” she wrote, “gold has been—and could continue to be—a better diversifier than long-duration Treasuries.”
The move reinforces what many wealth advisors are already seeing in client portfolios: traditional 60/40 allocations are struggling to deliver the same downside protection they once did. The simultaneous drawdown in bonds and equities over the past several quarters has prompted a reexamination of defensive positioning. For some, gold is becoming an essential part of that recalibration.
After breaching the $3,000 mark for the first time last month, gold briefly touched $3,150 in the days following the April 2 tariff announcement before consolidating. The metal has since regained momentum, as investors seek refuge in assets less exposed to government policy risk, currency debasement, and inflation uncertainty.
UBS analysts raised their 2025 gold price target to $3,500 in a Friday note, citing “escalating tariff uncertainty, weaker growth, higher inflation, and lingering geopolitical risks.” The firm noted that gold has remained resilient despite rising U.S. yields, outperforming other safe-haven assets such as Treasurys, the Swiss franc, and the Japanese yen.
“Gold seems to be unfazed by higher U.S. yields,” the UBS team wrote. “It continues to act as a store of value in an environment where other traditional safe havens are under pressure.”
Bank of America analysts echoed the view, maintaining their own $3,500 price target for 2025. They argue that the combination of persistent inflation, fiscal expansion, and trade dislocation is likely to keep real yields low and investor demand for hard assets elevated.
For RIAs and wealth managers, the shift underscores a deeper question: what replaces Treasurys as the primary portfolio stabilizer if rates and inflation remain structurally higher?
Treasurys have long played the dual role of ballast and income source in diversified portfolios. But with U.S. debt surpassing $35 trillion and foreign demand for Treasurys weakening, investors are increasingly questioning how long that role can hold. In the past, risk-off episodes reliably drove yields lower. Today, those moves are less consistent—and in some cases, inverted.
At the same time, inflation expectations have become sticky. While headline CPI readings have moderated, core inflation remains above target levels, complicating the Federal Reserve’s path toward policy normalization. Higher-for-longer rates mean bond volatility could persist, and the historical inverse correlation between stocks and bonds may not reassert itself soon.
This is where gold’s diversification potential has reemerged. Unlike fixed income, its value isn’t directly tied to yields or coupon payments. Instead, it acts as a hedge against both market stress and monetary instability—a role that resonates with clients seeking resilience amid fiscal and political uncertainty.
Wealth advisors are responding by reframing their risk frameworks. Many are carving out 3% to 7% allocations to gold or other real assets within client portfolios, using a mix of physical ETFs, mining equities, and active commodity strategies. The rationale is less about short-term price gains and more about correlation benefits.
Gold’s behavior over the past year has reinforced that logic. Even as real rates climbed, the metal continued to rise, reflecting investor skepticism that current policy can contain debt-driven inflation indefinitely. Meanwhile, its low correlation to both equities and bonds has reasserted its strategic utility as a portfolio hedge.
There are tactical considerations as well. For advisors managing taxable accounts, gold ETFs such as SPDR Gold Shares (GLD) or iShares Gold Trust (IAU) can offer efficient exposure but may trigger higher capital gains rates. For clients focused on long-term hedging, physically backed funds or futures-based strategies may offer better alignment with risk objectives.
Another area gaining traction among RIAs is tokenized gold. Some advisors are exploring blockchain-based gold instruments that offer fractional ownership, on-chain verification, and enhanced liquidity. While still niche, these products combine the tangibility of gold with the accessibility of digital assets—an appealing mix for younger, tech-savvy clients looking for inflation protection outside traditional markets.
Still, the fundamental appeal remains the same: gold’s independence from government credit risk. As sovereign debt levels rise and fiscal deficits widen, investors are reassessing the long-assumed safety of government bonds. The once-stable triangle of dollar strength, low inflation, and Treasury reliability looks less certain in a world of trade fragmentation and policy intervention.
For wealth advisors, this backdrop reinforces the need to diversify not just across asset classes but across risk regimes. The “new normal” may mean that traditional hedges no longer hedge. Instead, resilient portfolios will need exposure to assets that behave differently when both equities and bonds face pressure.
Wei Li’s observation captures this shift succinctly. When both the dollar and Treasurys fall during a risk-off event, the old playbook no longer applies. Advisors are now being forced to think more holistically about defensive construction—balancing liquidity needs, client psychology, and long-term inflation risk.
From a macro perspective, the dynamics driving gold’s strength are unlikely to reverse quickly. The trade conflict has reignited fears of supply chain fragmentation, while fiscal spending continues to rise in response to both political and geopolitical pressures. Central banks around the world have been net buyers of gold for two consecutive years, a sign that institutional actors are diversifying reserves away from the dollar.
Emerging-market central banks, in particular, are expanding their holdings as they seek insulation from currency volatility and sanctions exposure. That institutional demand provides a steady undercurrent of support for prices—something wealth managers are increasingly monitoring as part of their macro playbook.
At the client level, the conversation has shifted from “should I own gold?” to “how much exposure is appropriate?” The asset’s performance in recent downturns, coupled with its lack of counterparty risk, makes it an appealing complement to bonds rather than a replacement.
Advisors also note that investor psychology plays a role. Gold’s tangible, centuries-old reputation as a store of value can help calm anxious clients during volatility spikes—particularly those with memories of past market shocks. For fiduciaries tasked with managing both financial and emotional risk, that reassurance can be worth its weight in gold.
Looking ahead, the $3,500 price target now shared by both UBS and Bank of America reflects growing consensus that inflationary dynamics and fiscal stress will keep demand elevated. If current trends continue, gold’s outperformance could persist well into 2025, challenging the dominance of Treasurys as the default safe haven.
For RIAs, the takeaway is less about chasing short-term momentum and more about recognizing structural change. The environment of high debt, shifting trade policies, and persistent inflation requires a rethink of portfolio construction fundamentals. Gold’s resurgence is not just a price story—it’s a signal that the global hedging hierarchy is being rewritten.
In that context, BlackRock’s Li may have summed it up best: “Gold is a better diversifier than Treasuries in this environment of high debt.” For wealth advisors navigating this new market order, her message is a timely reminder that the rules of diversification are evolving—and that adapting early may be the most valuable hedge of all.
