The World Gold Council has produced another excellent piece of research entitled ‘Gold: Alternative Investment, Foundation Asset’. The research looks at diversified portfolios which contain non-traditional assets such as private equity, hedge funds, real estate and commodities and finds that such portfolios can be enhanced by a “discrete allocation to gold as a foundation.”
In summary, the report suggests that even if investors hold alternative assets, they are no substitute for the protection that a distinct allocation to gold can offer.
The research demonstrates that portfolios with an allocation to gold of between 3.3% and 7.5% (depending on the risk tolerance of the investor and the currency of reference) show higher risk-adjusted returns while consistently lowering Value at Risk (VaR).
The debate over whether gold is a bubble or not has been taking place for some years and may continue for many more years should gold’s bull market continue.
The real debate which has not been had yet is the crucial, empirically proven, importance for all investors to have an allocation to gold bullion.
Financial experts should focus on gold’s importance as a diversification rather than simply its price and valuation.