The Relevance of Gold as a Strategic Asset
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…!