The World Gold Council (WGC) has today launched its latest research, which reveals that investing in gold can offer equal of better average returns, with less volatility that typical investment methods.
The research report, called Gold as a Strategic Asset for UK Investors, examines gold’s role within a sterling-denominated investment portfolio.
It uses data spanning more than 25 years and states than “an allocation to gold helps investors obtain equal or better average returns, while incurring less volatility and reducing the maximum monthly losses”.
The WGC says that against a backdrop of sustained market turmoil and wealth erosion, investors are seeking a trusted source of security for their holdings, which gold can offer.
Its report shows how gold can “fulfil this role” by acting as a consistent portfolio diversifier – managing risk and mitigating potential losses in the portfolios of UK investors, an imperative in the prevailing environment.
Marcus Grubb, managing director of investment for the World Gold Council, said: “These extremely challenging times mean it’s impossible to quantify the risks for UK investors. They are facing an unprecedented combination of threats to their assets including extreme and unexpected market shocks that can trigger widespread value destruction.
“As UK investors reduce allocations to traditional investments such as equities and bonds and increasingly dash to cash, they face a double whammy, with the potential for stagnation of capital due to the lack of returns from cash and the increased possibility of inflation as a result of ongoing monetary stimulation. In this context, an urgent reappraisal of how to protect and create wealth is required and our latest research reinforces gold’s credentials as a core portfolio asset which reduces losses and preserves wealth.”
The WGC’s report uses Resampled Efficient Frontier optimisation technology, enabling it to analyse the statistical significance of gold for adding diversification value.
In the building of the report, five portfolio allocations representative of “a wide range of UK investors” were tested, with the WGC revealing that the optimal allocations were consistent with those highlighted across other currencies in “almost every economic scenario”.
Juan Carlos Artigas, global head of Investment Research, said of the report: “There is robust evidence for adding gold as a foundation to investors’ portfolios; risk-adjusted returns increase, losses diminish and capital is preserved.
“The optimal strategic allocation to gold for sterling-based investors ranges between 2.6% and 9.5% depending on their specific risk tolerance and assets they hold. This potential for investors to avoid a significant loss or increase portfolio gains, by adding gold, is especially important during extreme market events.”
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