Fully updated through mid-2015, this case examines the gold market. To decide whether to initiate a position in gold, the protagonist must assess its features as a strategic component in any portfolio as well as whether the time is right for an opportunistic tactical allocation. Factors that must be considered include how supply and demand for gold will be affected by the paths of real interest rates, inflation expectations, the eurozone debt crisis (and other financial stresses), and the international value of the U.S. dollar, among other factors. Excerpt UVA-F-1646 Rev. Aug. 13, 2015 Global Asset Allocation: All That Glitters? Rashonda Williams, responsible for global-asset allocation at a large pension fund, gazed at the Blue Ridge Mountains from her Crozet, Virginia, home office. Her task today was to decide whether and how much of her fund should be allocated to gold. At this point—August 2015—there were many reasons to think about adding gold to her fund. One was, quite simply, its spectacular performance over the past decade (Figure 1). To be sure, the recent sell-off was concerning, but in percentage terms, it was similar to the 2008 sell-off that preceded a doubling in price. Figure 1. Gold prices, 1970–July 2015 (in dollars per troy ounce). Williams knew past performance was no predictor of future performance, but some of the views that were currently making the rounds were compelling. One view was that if the global economy recovered strongly, inflation, now well contained, would surge, and gold, as the world's only natural store of value, would increase in value. Another view was that if the global recovery faltered and the world fell into a deep recession, confidence in governments would evaporate, and everyone would abandon fiat money and move into gold, thereby increasing its value. Recovery or recession, holders of gold win. Or was it that easy? . . .