Conventional Gilts will tend to see prices rise as interest rates/inflation decline, decline as interest rates/inflation rise.
Index Linked Gilts do similar, but in reflection of real yields (nominal yield minus inflation).
If the BoE applies yield curve control, prints money to buy gilts and thereby increase demand/push prices up/keep yields down, then there's the potential for real yields to move sharply negative. In the mid 1970's for example real yields were -12% or more at times. Under such situation long dated index linked gilt prices could rise substantially. In reflection of that potential insurance however present returns are of the order -2.5%/year cost.
Gold is somewhat like a index linked gilt, but perpetual and zero coupon. If real yields moved substantially higher (high inflation, low conventional bond yields) then gold likely would see prices rise substantially. But again in the opposite direction, a move to positive real yields, then investors would flight from gold and into the alternative positive real yield choices.
A Permanent Portfolio (Harry Browne's), holds 25% in each of stocks, long term gilt (LTG 20 year), short term gilt (STG 1 year) and gold. Instead of a STG/LTG barbell that combines to be like a 10 year central bullet, you might revise the duration up/down in reflection of high/low interest rates. Perhaps if above 6% interest rates target holding 15 year bullet, or if below 4% hold 5 year bullet, otherwise hold 10 year. On that basis you'd hold 25% stock, 25% gold, 50% in 5 year gilt at current valuation levels.
Yet another valuation based measure is to use the Dow/Gold ratio
https://www.macrotrends.net/1378/dow-to ... ical-chart If below 10 then gold is relatively expensive/stocks cheap, if above 15 then gold is relatively cheap/stocks expensive. In 1980 for instance it took a little over 1 ounce of gold to buy the Dow, at other times its taken 40 ounces to buy the Dow (1999 stock peak). Recently its up at around 17 levels, so perhaps stocks are moderately expensive/gold relatively inexpensive.
The Permanent Portfolio caters for 15/35 bands, i.e. 25% target weights, that can rise to being 35% or decline to being 15% before you rebalance back to 25% equal weightings. You might use those levels as the amount to adjust target weights to in accordance with the Dow/Gold ratio, so in the above, with a 10/15 Dow/Gold lower/upper levels and in seeing the Dow/Gold ratio at 17 you'd overweight gold, underweight stock ... 15% stock, 35% gold ... and from earlier combine that with 50% in 5 year Gilts.
For me that offers a better cost/benefit than looking to hold index linked gilts instead.
At a 5 year target maturity you might utilise high street bank fixed rate bonds, which at present when using moneysupermarket
https://www.moneysupermarket.com/saving ... ate-bonds/ indicates rates of 0.832% i.e. 0.56% from a 1 year, 0.71% from a two year ...etc.
1 0.56
2 0.71
3 0.89
4 0.95
5 1.05
0.832 average
50% loaded into that and yes, ouch! However if in a years time inflation has raged then likely stock and bond prices might have declined, potentially a lot, and you'd have 10% of your total portfolio value maturing, not having lost anything, gained 0.56% which in relative terms might be like being 100% up relative to stocks that had halved.
If inflation had raged and interest rates been kept low, then gold would tend to have soared in price.
Such a relative valuation PP has the tendency to cater for a 3% PWR, similar to SWR but where the end date value sees at least inflation adjusted wealth having been preserved after withdrawing 3% of the portfolio value in the first year, and then uplifting that amount by inflation as the amounts drawn in subsequent years. In the average case the portfolio tends to grow by around 2% real in addition to that, the 3% figure is the lower end (0% real in addition to that worst case). Without the brain (relative valuation based adjustments (Dow/gold ratio and interest rate based measures/model)) the PP tends to broadly yield around 1% less (2% PWR + 2% real average case).
The PP has the advantage of lowering earlier years sequence of returns risk and has tended to be relatively consistent across periods of both economic expansion and contraction, including over such periods of the very high rise of inflation across the 1970's/80's. A Japanese based PP has also performed well since the 1970's.
Whilst the conventional PP has lagged stock/bond heavy alternatives since the 1980's (when interest rates have declined from very high to very low levels that has favoured stocks and bonds), the rewards were still modest. Relative valuation based PP reduced that lag i.e. would have been more into stocks and bonds for much of that time rather than gold and cash (35% stock, 50% 15 year gilt, 15% gold). Maybe looking like this
https://tinyurl.com/28fc56ch from the mid 1980's and up to the 2009 financial crisis (6.5% annualised real instead of 7% for all-stock).
The relative value of gold can also be used as a means to value other assets, such as House/Gold price ratio.
https://www.bullionbypost.co.uk/index/g ... ate-ratio/Really the PP is akin to being a 50/50 equity/bond like portfolio as the very long dated treasury/gilts it holds are comparable to stocks. If as you're holding bonds to maturity you don't mark to market and simply just measure the actual interest/income then it has a lower volatility than 50/50 stock/bonds but similar reward expectancy, which nets a better Sharpe Ratio (better risk adjusted reward). Whilst also incorporating better insurance against the likes of hyperinflation/high-inflation type events (gold). Broadly over full cycles it can all wash
https://tinyurl.com/2nxffp7p and end up at comparable rewards (but a tendency for the PP to have the better Sharpe ratio). Within that however at times one or the other leads/lags. Relative valuation/adding a brain can help to reduce the lag risk.