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 Insider, host Keith Ford and AMP economist My Bui explore Prime Minister Anthony Albanese’s trip to the US and the critical minerals deal stemming from his meeting with President Donald Trump.
In this episode of Relative Return Insider, host Keith Ford and AMP chief economist Shane Oliver unpack the latest unemployment numbers and what they mean for a rate cut, as well as how the latest flare-up in the ongoing US–China trade dispute has highlighted the remaining disparity between gold and bitcoin.
In this episode of Relative Return Insider, host Keith Ford and AMP chief economist Shane Oliver take a look at the unfolding impacts and potential economic ramifications of the US government shutdown and the surge in gold and bitcoin prices.
In the latest episode of Relative Return Insider, host Keith Ford and AMP chief economist, Dr Shane Oliver, discuss this week’s RBA interest rate decision, a potential government shutdown in the US, and a new property scheme aimed at first home buyers.
