Gold Rises as a Core Asset: A "Quiet Revolution" in Portfolio Construction

As macroeconomic conditions change, investors have begun viewing gold as a core component for structural resilience, while increased European allocation to gold—now equal to government bonds—accelerates the adoption of real assets like ETFs in the United States, according to a new analysis by WisdomTree. 

Christopher Gannatti, Global Head of Research at WisdomTree, and Nitesh Shah, Head of Research in Europe, wrote that a quiet revolution is taking shape within investment portfolios. 

For decades, the 60/40 mix—60% equities, 40% bonds—was the shorthand for prudence, diversity, and balance, but the regime that made this formula work—low inflation, stable growth, and negative correlations between stock and bond returns—appears to have changed.

The researchers stated that after 2022, investors began questioning bonds' ability to offset equity risks. They added that in this new economic architecture, investors are rethinking what the "40" actually is. 

Morgan Stanley's latest global insights describe gold as an "attractive hedge against fiscal expansion and geopolitics," noting its 50% rise year-to-date and its near-zero correlation with equities, emphasizing that gold is not just a store of value; it is an expression of the limits of paper promises. 

Gannatti and Shah added that gold allocation in the market today has become linked to function rather than fear. 

ETF inflows exceeding $10 billion in September alone show that investors—institutions and individuals—are beginning to restructure their portfolios for an era of structural deficits and active fiscal policies. 

The metal's behavior has changed: what was previously viewed as an interest-rate-sensitive trade has now become a hedge against fiscal risks. Correlations with Treasury yields have shifted from deeply negative to positive, meaning gold now rises with rising long-term yields when those yields reflect stress on sovereign bonds, which is an inversion of an old mental model; investors are not fleeing volatility, but rather buying the only liquid asset that sits outside the liabilities of any government or central bank.

This represents a profound shift. Instead of treating gold as an add-on within the portfolio, some strategists have begun to consider it a core part of real assets—with a reallocation of 20% from the bond share—recognizing that diversification is no longer based on opposites but on orthogonality. 

For allocators, this is not nostalgia for the gold standard; it is a realization that the architecture of portfolio resilience is changing. The new 60/20/20 model—equities, fixed income, and real assets—may be closer to a quiet return to first principles: holding something that no one owes you.

Gannatti and Shah pointed out that this development is already underway in Europe. In WisdomTree's 2025 survey covering 802 participants from Europe and the UK, gold topped the list of safe assets, selected by 41% as their preferred store of value, significantly ahead of Bitcoin and the US dollar.

 Perhaps most telling is that average gold allocations in portfolios now stand at 5.7%, the same level as government bond holdings in developed markets. This balance shows that gold is no longer viewed as a marginal diversification tool but as a fixed core element in institutional portfolios.

 They added that in a global financial system, regional shifts do not remain confined to their scope; Europe's reallocation toward real assets inevitably influences global flows and price discovery, enhancing gold's liquidity and institutional importance across markets.

Furthermore, the assets investors use to access gold reflect this change. The survey shows that nearly 40% prefer Exchange Traded Products (ETPs), a percentage far exceeding the preference for physical bullion, futures, or mining stocks.

 The logic is practical: these products offer transparency, low cost, and scalability that suit modern portfolio construction models. For US investors, the European experience represents an important case study, suggesting that the debate over gold's role has moved past "why?" to "how?". 

As more allocators integrate gold within a core slice of real assets rather than as a tactical layer, we may see a gradual convergence between US and European portfolio designs, where hard assets are treated not as exceptions but as foundations for modern, effective diversification.