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BFI Bullion
September 3, 2019

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…!

,>> Read more and download the full report here.

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