The case for a strategic allocation to gold

October 2023-03-30

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What makes gold a strategic asset?

Gold has a key role as a strategic long term investment and as a mainstay allocation in a well-diversified portfolio. Investors have been able to recognise much of gold’s value over time by maintaining a long-term allocation and taking advantage of its safe-haven status during periods of economic uncertainty.

Gold is a highly liquid asset, which is no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time. It also benefits from diverse sources of demand: as an investment, a reserve asset, gold jewellery, and a technology component. These attributes mean gold can enhance a portfolio in three key ways:

• Delivering long-term returns 

• Improving diversification 

• Providing liquidity

 

Gold can enhance a portfolio in three key ways:

Returns

 

Diversification

 

Liquidity

Combined, these characteristics make gold a clear complement to stocks and bonds and a welcome addition to broad based portfolios.

Moreover, the shift towards a greater integration of environmental, social and governance (ESG) objectives within investment strategies has important implications and we believe gold can play a role in supporting these. Gold should be recognised as an asset that is responsibly sourced and delivered from a supply chain that adheres to high ESG standards. Gold also has a potential role to play in reducing investor exposure to climate-related risks.

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