The value of gold in an investment portfolio
A small allocation to gold could add significant benefits to a client’s investment portfolio, writes BetaShares's Drew Corbett.
The value of including gold in a balanced investment portfolio was examined by Oxford Economics in 2011.
A detailed analysis of the performance drivers of gold was conducted over an extended historical period and a forward-looking model was built to illustrate the likely gold performance under a range of scenarios.
The results showed gold is expected to underperform assets like equities in a benign/growth environment, but is expected to add significant portfolio benefits in deflationary and inflationary economic conditions.
Most importantly, the findings further exemplified that the inclusion of gold bullion in a balanced portfolio had the additional benefit of reducing the expected volatility in the investment returns.
We have run some analysis for Australian investors to demonstrate the portfolio benefit of including a 5 per cent exposure to physical gold bullion (with the A$/US$ exchange rate hedged).
We combined a 5 per cent allocation to physical gold bullion (currency hedged) with a 95 per cent allocation to the return of the S&P/ASX200.
Figure 1 shows that including a 5 per cent allocation to gold bullion would have significantly improved the return over five years ending August 2012.
{^image|(originalheight)478|(url)http://media.cirrusmedia.com.au/Money_Media_Library/Print Images/120913/MMSEPT13_3.jpg"http://www.moneymanagement.com.au/tag/betashares">BetaShares.
Recommended for you
In this episode of Relative Return, host Laura Dew is joined by Andrew Lockhart, managing partner at Metrics Credit Partners, to discuss the attraction of real estate debt and why it can be a compelling option for portfolio diversification.
In this week’s episode of Relative Return Unplugged, AMP’s chief economist, Shane Oliver, joins us to break down Labor’s budget, focusing on its re-election strategy and cost-of-living support, and cautioning about the long-term impact of structural deficits, increased government spending, and potential risks to productivity growth.
In this episode of Relative Return, host Laura Dew chats with Mark Barnes, head of investment research, and Catherine Yoshimoto, director of product management, from FTSE Russell about markets in Donald Trump's second presidency and how US small caps are faring compared to their large-caps counterpart.
In this episode of Relative Return Unplugged, we examine the push for superannuation tax reforms aimed at saving $10 billion annually, as well as the immense pressure being placed on Treasurer Jim Chalmers ahead of the budget and Deloitte’s warning of a $26.1 billion deficit.
