The "Debasement Trade": Gold and China as a Refuge and Opportunity

In a global economic environment marked by unprecedented monetary expansion, especially since the COVID-19 crisis, an investment strategy known as the "Debasement Trade" has emerged. This thesis is based on the idea that major fiat currencies, led by the US dollar, are losing value at an accelerated pace due to massive money printing by central banks.

The "Debasement" Thesis

The term "debasement" refers to the degradation of the quality or value of a currency. Historically, this occurred when rulers reduced the precious metal content in coins. Today, it manifests through expansionary monetary policies (Quantitative Easing) that increase the money supply, thereby diluting the purchasing power of each monetary unit. The "Debasement Trade" thesis argues that, in this scenario, investors should seek assets that act as a store of value and cannot be "printed" at will.

Portfolio Composition

This portfolio is built on two fundamental pillars that seek not only to protect capital but also to take advantage of the shift in the global economic order:

1. Gold (80%)

Gold has historically been the ultimate safe-haven asset. Its intrinsic value and limited supply make it a natural hedge against inflation and currency devaluation. In a context of "debasement," gold tends to appreciate as investors lose confidence in fiat money. An 80% allocation reflects a strong conviction in its role as the primary protector of wealth.

2. Ex-USA Equities: Focus on China (20%)

In order not to give up growth potential and to obtain a higher risk-adjusted return, the portfolio is diversified with a 20% allocation to equities outside the United States, with a particular focus on China. The choice of China is based on several factors:

• Growth Potential: The Chinese economy continues to show great long-term growth potential.
• New World Order: As the economic dominance of the US is challenged, China is positioned as a key player in the new global economic paradigm.
• Decorrelation: Chinese equities can offer valuable decorrelation with Western markets, improving portfolio diversification.

Conclusion

The "Debasement Trade" is a strategy for investors who have a critical view of the future of the current monetary system. By combining the security of gold with the growth potential of Chinese equities, this portfolio seeks to navigate a highly uncertain environment, protecting capital from currency devaluation while positioning itself to capitalize on the rise of new economic powers.