The macroeconomic landscape has led many investors to consider both gold and bonds as potential investment options. However, according to Goldman’s McGeoch, there’s a crucial difference between these two assets that could have a significant impact on their respective appeal.

On the one hand, bonds offer attractive yields in today’s low-interest-rate environment. With bond yields at these levels, the temptation to buy duration is certainly understandable. After adjusting for taxes, the potential returns can look very appealing.

On the other hand, McGeoch argues that there’s a catch when it comes to buying bonds. In essence, you only buy bonds today if you believe they won’t be cheaper tomorrow. In other words, you need to believe that yields are close to peaking. If that’s your macro view, then McGeoch suggests that gold might be a better option.

Both gold and bonds offer exposure to a similar macro outcome – a turn in interest rates, weaker growth, or an eventual shift towards easier monetary policy. However, the key difference lies in the supporting actors. Gold has structural buying from central banks around the world, while bonds remain vulnerable to fiscal policy, political uncertainty, and government borrowing needs.

In other words, while both assets offer a similar macro play, gold offers a cleaner way to express that view without taking on the political and fiscal risks embedded in sovereign bonds. This is particularly important in today’s environment, where political and fiscal uncertainty are increasingly common.

Ultimately, the decision between gold and bonds will depend on your individual investment goals and risk tolerance. However, McGeoch’s argument highlights the importance of considering the supporting actors when making an investment decision. By understanding the factors that could impact the value of your investment, you can make a more informed decision and potentially avoid unnecessary risks.