Overview

The value of all the gold in the world is $25 trillion – yet very few investors have gold in their portfolios. Ironically, gold is the oldest financial asset, but it is poorly understood and under-researched. There are many stories about gold, but very little evidence. This course provides the evidence. After completing the course, you will understand how gold performs during equity market turmoil and during inflation surges and its role in a diversified portfolio. The course explores the reasons why the gold price has recently surged by focusing on the financialization of gold, central bank accumulation, de-dollarization efforts, questions about the status of the U.S. dollar as a reserve currency, and the potential demand shock if gold is classified in a future version of Basel III as an asset commercial banks can hold for regulatory purposes (central banks hold gold as a reserve asset and it seems contradictory not to allow commercial banks to do the same). The Golden Dilemma framework is also introduced to credible future price paths for gold. Finally, the long-term prospects for gold are detailed, given expected technological innovations.

Syllabus

Why Invest in Gold?

This module explains why gold has sustained value over centuries by grounding its appeal in physical and institutional properties—durability, scarcity, fungibility, and the absence of single-authority control. We introduce the “golden constant” and evaluate gold’s performance as an inflation hedge, separating its long-term, purchasing-power stability from its short-term volatility. We then analyze gold’s role in diversified portfolios by examining its volatility and its (time-varying) correlations with equities and bonds, drawing out implications for portfolio risk. Finally, we assess the recent drivers of price increases and, using the golden-constant lens, construct plausible future price scenarios.

Why is the Current Price of Gold so High? Financialization and Politics

This module explains how gold’s price is shaped by supply rigidity (slow, capital-intensive mine responses) and sector-specific demand across jewelry, technology, and investment. It then examines how financialization—via exchange-traded funds and gold-backed stablecoins—has broadened access and intensified demand, weighing the trade-offs between physical holdings and ETF exposure (liquidity, fees, tracking error, and custody risk). Using the “golden constant” framework alongside new empirical evidence, we assess how ETF adoption has influenced real gold prices. We analyze how the “weaponization” of the U.S. dollar and sanctions regimes spur some countries to reduce dollar dependence and de-dollarize, redirecting portfolio demand toward gold. Finally, we evaluate central-bank accumulation—especially by China and Russia—its implications for global reserves, and what this means for future demand and price dynamics.

Why is the Price of Gold so High? New Currency Regime and a New Role for Gold

This module examines how the U.S. dollar’s reserve-currency status channels global demand into dollar assets while creating the Triffin dilemma. It then analyzes how bilateral central-bank swap lines, sanctions risk, and deliberate de-dollarization efforts are reshaping reserve strategies and lifting official-sector demand for gold. We review Basel III’s High-Quality Liquid Asset (HQLA) framework—eligibility tests, haircuts, and liquidity horizons—and evaluate the case for classifying gold as Tier 1 HQLA alongside top-quality sovereigns. Finally, we assess the demand and price impact if such a designation were adopted, including likely balance-sheet reallocation by banks and central banks and plausible price paths for gold under alternative adoption scenarios.

Where Will the Price of Gold Go?

This module examines how the U.S. dollar’s reserve-currency status channels global demand into dollar assets while creating the Triffin dilemma. It then analyzes how bilateral central-bank swap lines, sanctions risk, and deliberate de-dollarization efforts are reshaping reserve strategies and lifting official-sector demand for gold. We review Basel III’s High-Quality Liquid Asset (HQLA) framework - eligibility tests, haircuts, and liquidity horizons - and evaluate the case for classifying gold as Tier 1 HQLA alongside top-quality sovereigns. Finally, we assess the demand and price impact if such a designation were adopted, including likely balance-sheet reallocation by banks and central banks and plausible price paths for gold under alternative adoption scenarios.