The Relevance of Gold as a Strategic Asset

September 3, 2019

  

The World Gold Council just published a country specific guide to gold's role as a strategic asset. According to the report, gold is a highly liquid yet scarce asset, and it is no one’s liability. It is bought as a luxury good as much as an investment.

 

As such, gold can play four fundamental roles in a portfolio:

 

  

  • a source of long-term returns

  • a diversifier that can mitigate losses in times of market stress

  • a liquid asset with no credit risk that has outperformed fiat currencies

  • a means to enhance overall portfolio performance.


The analysis shows that adding 2%, 5% or 10% in gold over the past decade to the average pension fund portfolio would have resulted in higher risk-adjusted returns.

Most importantly, gold has outperformed all major fiat currencies over time.

 

Relative value between major currencies and gold since 1900*

Source: Bloomberg, Harold Marcuse – UC Santa Barbara, World Gold Council

 

The report offers a number of very interesting charts and statistics, and it discussed the aforementioned topics under the following chapter titles:

 

  • Why gold, why now

  • A source of returns

  • Well above inflation

  • A high-quality, hard currency

  • Diversification that works

  • A deep and liquid market

  • Enhancing portfolio performance

  • Gold goes beyond commodities

 

The report is definitely worth a read, particularly for those new to the topic and undecided on how to address the current day economic realities…!

 

>> Read more and download the full report here.

 

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