Wei Li, BlackRock’s global chief investment strategist, has made a striking declaration that challenges decades of conventional portfolio construction wisdom. In a recently published LinkedIn post, Li stated unequivocally that gold now serves as a better diversifier than United States Treasury securities for investors navigating the current market environment characterized by elevated sovereign debt levels.
“Also not normal—risk off, dollar and Treasuries down,” Li wrote, describing the unusual market dynamics currently unfolding. “I will keep saying it: gold is a better diversifier than Treasuries in this environment of high debt.”
This assertion from one of the world’s most influential asset managers carries significant weight for wealth advisors and institutional investors who have long relied on Treasury securities as the bedrock of defensive portfolio positioning. Li’s willingness to publicly advocate for gold over government bonds signals a potential paradigm shift in how the largest money manager on the planet views traditional safe-haven assets.
The Unusual Market Dynamics Driving BlackRock’s View
Li’s comments arrive amid a sharp sell-off in United States government bonds that has rattled investor assumptions about how markets behave during periods of stress. The 10-year Treasury yield climbed to nearly 4.4 percent on Friday, continuing its upward trajectory as bond prices fell throughout the week. This move was triggered by renewed investor concerns that President Donald Trump’s escalating trade tariffs could have lasting effects on global supply chains and inflation dynamics.
What makes this episode particularly notable is the simultaneous weakness in multiple traditional safe-haven assets. The dollar has weakened significantly through the recent turmoil, sliding to a three-year low against the euro and a 10-year low versus the Swiss franc. In a post earlier in the month, Li characterized these trends as evidence of a “new regime” defined by persistent inflationary pressures and elevated sovereign debt levels.
“In this regime,” Li wrote, “gold has been—and could continue to be—a better diversifier than long-duration Treasuries.”
For decades, Treasury securities have anchored diversified portfolios as reliable safe havens during times of market stress, providing ballast when equity markets tumble. The assumption that Treasurys would rally when stocks fell formed the foundation of the traditional 60/40 portfolio allocation that has guided wealth management for generations. But that assumption is now being severely tested.
In recent trading sessions, bond prices and the dollar have both declined even as investors sought safety—an unusual and concerning pattern that highlights how shifting macroeconomic dynamics are reshaping the traditional correlations that portfolio managers have relied upon for decades. When risk-off sentiment typically would drive capital into government bonds and push yields lower, investors are instead witnessing the opposite: yields rising and bond prices falling alongside equity weakness.
Major Investment Banks Align Behind Gold
BlackRock’s bullish stance on gold relative to Treasuries aligns with views from other major financial institutions. UBS analysts raised their 2025 gold price target to $4,000 per ounce in a Friday research note, citing “escalating tariff uncertainty, weaker growth, higher inflation, and lingering geopolitical risks.” The Swiss bank’s analysts noted that gold has demonstrated remarkable resilience despite rising United States yields, outperforming other traditional safe-haven assets including Treasuries, the Swiss franc, and the Japanese yen.
“Gold seems to be unfazed by higher U.S. yields,” the UBS research 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 have echoed this constructive view, maintaining their own $4,000 per ounce price target for 2025. Their analysis argues that the combination of persistent inflation, ongoing fiscal expansion, and trade dislocation is likely to keep real yields low and investor demand for hard assets elevated for the foreseeable future.
The convergence of price targets from two of the world’s largest investment banks at the $4,000 level reflects growing consensus that inflationary dynamics and fiscal stress will sustain demand for gold as both a hedge and a store of value. Gold recently breached the $4,000 per ounce mark for the first time last month and briefly touched $4,150 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.
The Structural Challenge Facing Traditional Portfolios
The shift BlackRock’s Li describes underscores a deeper question confronting wealth managers and registered investment advisors: what replaces Treasury securities as the primary portfolio stabilizer if interest rates and inflation remain structurally higher than the levels that prevailed during the past two decades?
Treasury securities have long played the dual role of ballast and income source in diversified portfolios. But with United States federal debt surpassing $35 trillion and foreign demand for Treasury securities weakening, investors are increasingly questioning how long that stabilizing role can hold. In previous market cycles, risk-off episodes reliably drove Treasury yields lower as capital fled to safety. Today, those moves are less consistent, and in some cases, they have inverted entirely, with yields rising during periods of market stress.
Simultaneously, inflation expectations have become sticky. While headline Consumer Price Index readings have moderated from their peaks, core inflation remains above the Federal Reserve’s target levels, complicating the central bank’s path toward policy normalization. The higher-for-longer rate environment means bond volatility could persist, and the historical inverse correlation between stocks and bonds may not reassert itself anytime soon—if it does at all.
This breakdown in traditional correlations is precisely where gold’s diversification potential has reemerged as a compelling consideration for portfolio construction. Unlike fixed-income securities, gold’s value isn’t directly tied to yields or coupon payments. Instead, it acts as a hedge against both market stress and monetary instability, a dual role that resonates strongly with clients seeking portfolio resilience amid fiscal and political uncertainty.
How Wealth Advisors Are Responding
The market dynamics Li describes are prompting wealth advisors to reframe their risk frameworks fundamentally. Many are now carving out allocations of 3 percent to 7 percent to gold or other real assets within client portfolios, using a mix of physically-backed exchange-traded funds, mining equities, and active commodity strategies. The rationale driving these allocations is less about capturing short-term price gains and more about securing the correlation benefits that gold provides when both stocks and bonds face simultaneous pressure.
Gold’s behavior over the past year has reinforced this allocation logic. Even as real interest rates climbed, the metal continued to appreciate, reflecting investor skepticism that current monetary policy can contain debt-driven inflation indefinitely. Meanwhile, gold’s low correlation to both equities and bonds has reasserted its strategic utility as a portfolio hedge during a period when traditional defensive assets have failed to provide their expected protection.
There are tactical considerations as well for advisors implementing gold allocations. For those managing taxable accounts, gold exchange-traded funds such as SPDR Gold Shares or iShares Gold Trust can offer efficient exposure but may trigger higher capital gains tax rates given gold’s classification as a collectible. For clients focused on long-term hedging rather than trading, physically-backed funds or futures-based strategies may offer better alignment with their risk objectives and tax situations.
The Fundamental Case: Government Credit Risk and Fiscal Concerns
The fundamental appeal driving gold’s resurgence remains its independence from government credit risk. As sovereign debt levels rise and fiscal deficits widen across developed economies, investors are reassessing the long-assumed safety of government bonds. The once-stable triangle of dollar strength, low inflation, and Treasury reliability looks considerably less certain in a world characterized by trade fragmentation and aggressive policy intervention.
Central banks around the world have reinforced this view through their actions. Official sector institutions have been net buyers of gold for two consecutive years, a clear signal that institutional actors managing sovereign reserves are diversifying away from dollar-denominated assets. Emerging market central banks in particular are expanding their gold holdings as they seek insulation from currency volatility and potential sanctions exposure. That institutional demand provides a steady undercurrent of support for gold prices—something wealth managers are increasingly monitoring as part of their macroeconomic analysis.
From a macroeconomic perspective, the dynamics driving gold’s strength are unlikely to reverse quickly. The ongoing trade conflict has reignited fears of supply chain fragmentation, while fiscal spending continues to rise in response to both political priorities and geopolitical pressures. These structural factors suggest that the conditions favoring gold relative to traditional safe-haven assets could persist for an extended period.
Wei Li’s Message to the Market
Wei Li’s observation captures the essence of this structural shift with characteristic directness. When both the dollar and Treasury securities decline during a risk-off event, the old investment playbook no longer applies. Advisors and institutional investors are now being forced to think more holistically about defensive portfolio construction: balancing liquidity needs, client psychology, and long-term inflation risk in ways that previous market environments did not require.
For wealth advisors, the takeaway from BlackRock’s positioning is less about chasing short-term momentum in gold prices and more about recognizing structural change in how markets function. The current environment of high debt, shifting trade policies, and persistent inflation requires a fundamental rethink of portfolio construction principles that have remained largely static for decades. Gold’s resurgence is not merely a price story, it represents a signal that the global hierarchy of hedging assets is being rewritten.
In that context, BlackRock’s Li may have articulated the new reality most clearly: “Gold is a better diversifier than Treasuries in this environment of high debt.” For wealth advisors navigating this evolving market order, her message serves as a timely reminder that the established rules of diversification are changing, and that adapting portfolios early to reflect these new dynamics may prove to be the most valuable hedge of all.
The shift from Treasury securities to gold as the preferred diversifier represents more than a tactical adjustment. It reflects a broader reassessment of assumptions that have guided institutional investment for generations. When the world’s largest asset manager publicly advocates for gold over government bonds, the implications extend well beyond near-term trading decisions. It suggests that the investment landscape has entered a new phase where traditional relationships can no longer be taken for granted, and where investors must think creatively about how to protect portfolios in an environment that defies historical patterns.
Acknowledgment: This article was written with the help of AI, which also assisted in research, drafting, editing, and formatting this current version
