As a global currency, an investment and simply a thing of beauty, gold has held an allure for thousands of years. For the investor, that allure is largely to do with gold’s proven ability to preserve value over time and be a good diversifier within a portfolio.
Portfolio Diversification Preservation of Wealth Risk Factors
Safe haven
Completely free of credit risk, although it bears a market risk, gold has always been a secure refuge in unsettled times. Its ‘safe haven’ attributes attract wise investors.
Managing wealth
Gold has proved itself to be an effective way to manage wealth. For at least 200 years the price of gold has kept pace with inflation.
In 1999, Alan Greenspan, then Chairman of the Federal Reserve Board of the United States of America, said: "Gold still represents the ultimate form of payment in the world."
Effective performance
Another important reason to invest in gold is its consistent delivery within a portfolio of assets. Its performance tends to move independently of other investments and of key economic indicators. Even a small weighting of gold in an investment portfolio can help reduce overall risk.
New Research
Ibbotson Associates has recently published an asset allocation study on precious metals entitled Portfolio Diversification with Gold, Silver, and Platinum by Thomas M. Idzorek. The report, provides robust and compelling evidence of the diversification benefits that precious metals can bring to investment portfolios, using resampled frontier methodology.
