{"id":33019,"date":"2025-11-12T13:28:32","date_gmt":"2025-11-12T13:28:32","guid":{"rendered":"https:\/\/naijaglobalnews.org\/?p=33019"},"modified":"2025-11-12T13:28:32","modified_gmt":"2025-11-12T13:28:32","slug":"gold-the-physical-the-future-the-financial-insights","status":"publish","type":"post","link":"https:\/\/naijaglobalnews.org\/?p=33019","title":{"rendered":"Gold \u2013 the physical, the future, the financial | Insights"},"content":{"rendered":"

\n<\/p>\n

Once\u00a0<\/span>purchased<\/span>, physical gold needs to be stored,\u00a0<\/span>secured<\/span>\u00a0and possibly\u00a0<\/span>insured<\/span>\u00a0which all\u00a0<\/span>incur<\/span>\u00a0<\/span>additional<\/span>\u00a0<\/span>costs<\/span>\u00a0to the holder<\/span>.<\/span>\u00a0<\/span>Beyond its traditional roles, gold also plays a critical part in modern technology, being used in electronics such as cell phones and circuit boards, as well as in aerospace and medical devices, due to its excellent conductivity.<\/span><\/span>\u00a0<\/span><\/p>\n

What<\/span>\u00a0do gold fut<\/span>ures\u00a0<\/span>reveal about<\/span>\u00a0investor sentiment and market structure?<\/span><\/span><\/h2>\n<\/p>\n

There are\u00a0<\/span>futures<\/span>\u00a0contract<\/span>s<\/span>\u00a0listed on various exchanges globally, such as\u00a0<\/span>the\u00a0<\/span>CME, that reference a specification on the delivery of physical bullion at a\u00a0<\/span>future\u00a0<\/span>date. Investment via fu<\/span>tures is\u00a0<\/span>generally<\/span>\u00a0unfunded<\/span>\u00a0w<\/span>ith only<\/span>\u00a0<\/span>a<\/span>n<\/span>\u00a0<\/span>initial<\/span>\u00a0margin and brokerage fees due<\/span>\u00a0<\/span>at<\/span>\u00a0trade\u00a0<\/span>inception<\/span>. However<\/span>,<\/span>\u00a0<\/span>the<\/span>\u00a0<\/span>drawback\u00a0<\/span>of\u00a0<\/span>gold\u00a0<\/span>is\u00a0<\/span>that it\u00a0<\/span>does not yield i<\/span>ncome or\u00a0<\/span>dividends<\/span>\u00a0and there are costs associated with\u00a0<\/span>storage<\/span>,<\/span>\u00a0<\/span>security<\/span>\u00a0and insurance in holding the asset.\u00a0<\/span><\/span>\u00a0<\/span><\/p>\n

Th<\/span>ese costs are\u00a0<\/span>reflected by a contango\u00a0<\/span>forward<\/span>\u00a0curve<\/span>\u00a0as seen in the chart of Exhibit 1; this results in a\u00a0<\/span>negative roll yield in\u00a0<\/span>gold<\/span>\u00a0indices such as the\u00a0<\/span>Bloomberg Gold Subindex\u00a0<\/span>\u00a0Index<\/span>}<\/span>.<\/span>\u00a0Over the past year,\u00a0<\/span>this<\/span>\u00a0cost of carry for BCOMGC has been\u00a0<\/span>approximately\u00a0<\/span>1%.<\/span>\u00a0Over the past 5 years, the gold forward curve has steepened into deeper contango<\/span>\u00a0<\/span>as a result o<\/span>f<\/span>\u00a0the higher interest rate regime \u2013 the purple line (2025) is more upward sloping compared to\u00a0<\/span>the\u00a0<\/span>orange line (2020).<\/span><\/p>\n

For the\u00a0<\/span>financial format,\u00a0<\/span>gold\u00a0<\/span>can be accessed in index format\u00a0<\/span>\u2013 the Bloomberg Gold index exposure<\/span>\u00a0can be<\/span>\u00a0replicated via rolling\u00a0<\/span>futures<\/span>\u00a0contracts which in excess return<\/span>\u00a0form<\/span>,<\/span>\u00a0<\/span>capture<\/span>\u00a0spot and roll yield returns. Gold is\u00a0<\/span>often<\/span>\u00a0partnered with other assets, such as\u00a0<\/span>silver\u00a0<\/span>in<\/span>\u00a0the Bloomberg Precious Metals Index<\/span>\u00a0<\/span>{<\/span>BCOMPR<\/span>\u00a0Index<\/span>}<\/span>\u00a0or\u00a0<\/span>B<\/span>itcoin\u00a0<\/span>in the\u00a0<\/span>Bloomberg Bitcoin and Gold <\/span>BBIG\u00a0<\/span>I<\/span>ndex<\/span>\u00a0{BBIG\u00a0<\/span>Index}.<\/span>\u00a0BBIG<\/span>\u00a0is\u00a0<\/span>equally<\/span>\u00a0weighted<\/span>\u00a0with quarterly rebalancing<\/span>\u00a0at the end of March, June,<\/span>\u00a0<\/span>Septembe<\/span>r<\/span>\u00a0and December<\/span>\u00a0to<\/span>\u00a0<\/span>fixe<\/span>d<\/span>\u00a0<\/span>50<\/span>%<\/span>\/50<\/span>%<\/span>\u00a0<\/span>weights.\u00a0<\/span><\/p>\n

What are the benefits of investing in a Gold and Bitcoin index instead of holding each asset separately?<\/span>\u00a0<\/span><\/h2>\n

\u00a0<\/span><\/p>\n

In Exhibit<\/span>\u00a0<\/span>2, we show the relative weights of\u00a0<\/span>B<\/span>itcoin\u00a0<\/span>and\u00a0<\/span>gold\u00a0<\/span>over time in the BBIG Index.\u00a0<\/span>The weights are fixed to 50<\/span>%<\/span>\/50% on each quarterly rebalance date<\/span>,<\/span>\u00a0<\/span>and\u00a0<\/span>between the<\/span>se<\/span>\u00a0dates, the weights of ea<\/span>ch\u00a0<\/span>compon<\/span>ent<\/span>\u00a0will deviate<\/span>. A<\/span>s Bitcoin rallied in Q4 2024, post<\/span>\u2013<\/span>US election results,\u00a0<\/span>its<\/span>\u00a0representative\u00a0<\/span>increased to 63%. The index weights were then rebalanced back to 50<\/span>%<\/span>\/50<\/span>%<\/span>\u00a0weights at the end of Dec<\/span>ember 20<\/span>24.<\/span>\u00a0<\/span><\/span><\/p>\n

During\u00a0<\/span>the\u00a0<\/span>quarterly rebalancing<\/span>\u00a0process,\u00a0<\/span>the BBIG index\u00a0<\/span>may\u00a0<\/span>ri<\/span>s<\/span>e<\/span>\u00a0<\/span>in\u00a0<\/span>the<\/span>\u00a0<\/span>s<\/span>hort<\/span>\u00a0<\/span>term and then scale back during periods of price reversion.<\/span>\u00a0Overall, since Jan-24 the quarterly rebalancing version of the equal-weighted index has outperformed the\u00a0<\/span>no<\/span>-rebalancing\u00a0<\/span>equ<\/span>al dol<\/span>lar notional\u00a0<\/span>version\u00a0<\/span>by\u00a0<\/span>4.30<\/span>\u00a0<\/span>%<\/span>\u00a0annualized.<\/span><\/span>\u00a0<\/span><\/p>\n

Another big hurdle for\u00a0<\/span>d<\/span>igital\u00a0<\/span>a<\/span>ssets is\u00a0<\/span>their<\/span>\u00a0elevated volatility<\/span>\u00a0\u2013 the\u00a0<\/span>long-term<\/span>\u00a0volatility of\u00a0<\/span>B<\/span>itcoin\u00a0<\/span>was 100%\u00a0<\/span>but<\/span>\u00a0has recently\u00a0<\/span>decrease<\/span>d<\/span>\u00a0to 44%<\/span>.\u00a0<\/span>B<\/span>y coupling these\u00a0<\/span>two\u00a0<\/span>uncorrelated assets together<\/span>,\u00a0<\/span>the\u00a0<\/span>1-year\u00a0<\/span>volatility\u00a0<\/span>of the index\u00a0<\/span>is dampened\u00a0<\/span>to\u00a0<\/span>25%.<\/span>\u00a0The long-term\u00a0<\/span>3-year\u00a0<\/span>correlation is 2%, however over the past year as both\u00a0<\/span>Bitcoin\u00a0<\/span>and\u00a0<\/span>gold\u00a0<\/span>have risen in tandem, correlation reach<\/span>ing a<\/span>\u00a0<\/span>new high<\/span>\u00a0at 44%<\/span>\u00a0in Aug-24, as seen in Exhibit 3.<\/span><\/span>\u00a0<\/span><\/p>\n

The Bloomberg Commodities Index\u00a0(BCOM)\u00a0is a\u00a0broad-based\u00a0commodities benchmark.\u00a0Currently, BCOM has\u00a0approximately $108bn of global benchmarked assets.\u00a0\u00a0As of November 2025,\u00a0BCOM is\u00a0currently\u00a0constructed using 24\u00a0of the most traded commodities futures contracts across 6 sectors of Energy, Grains, Softs,\u00a0Livestock,\u00a0Industrial metals,\u00a0and\u00a0Precious\u00a0metals,\u00a0\u2013 including\u00a0gold.\u00a0\u00a0One third of the target weights in BCOM\u00a0is\u00a0derived according to the world production of each\u00a0commodity\u00a0and two thirds\u00a0are\u00a0derived from the underlying liquidity of each\u00a0commodity\u00a0futures market.\u00a0<\/span>\u00a0<\/span><\/p>\n

However,\u00a0for\u00a0gold and silver,\u00a0liquidity measures are only considered\u00a0due to their limited ongoing production and mining.\u00a0Thereafter, weights are then adjusted further to cap commodity and sector exposures enhancing diversification and reducing the impact of idiosyncratic risk\u00a0\u2013 where single commodities exposure capped at 15% and floored at 2%.\u00a0As seen in the chart of Exhibit 4, the weight of gold in BCOM has been steadily increasing year-on-year to the 15% cap,\u00a0where it has been hovering since 2022. An explanation for this uptick in weight representation\u00a0could be\u00a0due to\u00a0greater liquidity in trading volumes as\u00a0the gold market\u00a0has\u00a0experienced\u00a0a\u00a0dramatic shift to financialization with the advent\u00a0and\u00a0subsequent\u00a0growth\u00a0of gold ETFs\u00a0over the past two decades.<\/span><\/p>\n

Gold\u2019s journey from a timeless physical store of value to its use in financial indices underscores its enduring relevance in an ever-changing investment landscape. Whether held in tangible form, traded through futures, or accessed via diversified indices, gold continues to bridge the worlds of old traditions and high-tech innovation. Gold holds a dual identity: as both a defensive asset and a component of the total portfolio approach. As markets navigate volatility, digital transformation, and shifting macroeconomic tides, the shiny yellow metal continues to play a significant role in providing balance, resilience, and long-term value.<\/span><\/p>\n

Learn more about Bloomberg Commodity Indices\u00a0here.<\/em><\/p>\n

\n\t\t\t\t\t\t\tDisclaimer\t\t\t\t\t\t<\/h5>\n<\/p>\n

The data and other information included in this publication is for illustrative purposes only, available\u00a0\u201cas is\u201d,\u00a0non-binding and constitutes the provision of\u00a0factual information, rather than financial product advice.\u00a0\u00a0BLOOMBERG and BLOOMBERG INDICES (the \u201cIndices\u201d) are trademarks or service marks of Bloomberg Finance L.P. (\u201cBFLP\u201d). BFLP and its affiliates, including BISL, the administrator of the Indices, or their\u00a0licensors\u00a0own all proprietary rights in the Indices. Bloomberg L.P. (\u201cBLP\u201d) or one of its subsidiaries provides BFLP, BISL and its subsidiaries with global marketing and operational support and service. Certain features, functions,\u00a0products\u00a0and services are available only to sophisticated investors and only where\u00a0permitted. Bloomberg (as defined below) does not approve or endorse these materials or guarantee the accuracy or completeness of any information herein, nor does Bloomberg make any warranty, express or implied, as to the results to be obtained therefrom, and, to the maximum extent allowed by law, Bloomberg shall not have any liability or responsibility for injury or damages arising in connection therewith. Nothing in the Services or Indices shall constitute or be construed as an offering of financial instruments by Bloomberg, or as investment advice or investment recommendations (i.e., recommendations as to\u00a0whether or not\u00a0to \u201cbuy\u201d, \u201csell\u201d, \u201chold\u201d, or to enter or not to\u00a0enter into\u00a0any other transaction involving any specific interest or interests) by Bloomberg. Information available via the Index should not be\u00a0considered as information\u00a0sufficient upon which to base an investment decision. All information provided by the Index or in this publication is impersonal and not tailored to the needs of any person,\u00a0entity\u00a0or group of\u00a0persons. Absence of any trademark or service mark from this list does not waive Bloomberg\u2019s intellectual property rights in that name,\u00a0mark\u00a0or logo.\u00a0 For the purposes of this publication, Bloomberg includes BLP, BFLP,\u00a0BISL\u00a0and\/or their affiliates.\u00a0<\/span>\u00a0<\/span><\/p>\n

BISL is registered in England and Wales under registered number 08934023 and has its registered office at 3 Queen Victoria Street, London, England, EC4N 4TQ. BISL is\u00a0authorised\u00a0and regulated by the Financial Conduct Authority as a benchmark administrator.\u00a0<\/span>\u00a0<\/span><\/p>\n

\u00a9 2025 Bloomberg. All rights reserved.<\/span>\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Once\u00a0purchased, physical gold needs to be stored,\u00a0secured\u00a0and possibly\u00a0insured\u00a0which all\u00a0incur\u00a0additional\u00a0costs\u00a0to the holder.\u00a0Beyond its traditional roles, gold also plays a critical part in modern technology, being used in electronics such as cell phones and circuit boards, as well as in aerospace and medical devices, due to its excellent conductivity.\u00a0 What\u00a0do gold futures\u00a0reveal about\u00a0investor sentiment and market structure?<\/p>\n","protected":false},"author":1,"featured_media":33020,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[1790,2284,129,12239,16789],"class_list":{"0":"post-33019","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-financial","9":"tag-future","10":"tag-gold","11":"tag-insights","12":"tag-physical"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/33019","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=33019"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/33019\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/33020"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=33019"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=33019"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=33019"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}