Gold's correlation with other assets is not fixed, suggesting that it can offer genuine diversification.
Above: Individually numbered and stamped gold bars produced by the Royal Mint Refinery
Kevin Gardiner Global Investment Strategist
Kevin, turning to the present, why does gold remain a relevant asset class for our wealth management clients today?
At a time when many investors are wary of the monetary experimentation that has followed the financial crisis and now the pandemic, gold can offer an alternative store of value to conventional safe haven assets. It has been valued highly for three millennia, and is independent of governments, central banks, and the internet. Gold's correlation with other assets is not fixed, suggesting that it can offer genuine diversification. For the nervous investor, the physical presence of even a small holding in gold in a multi-asset portfolio can also be reassuring.
For the nervous investor, the physical presence of even a small holding in gold in a multi-asset portfolio can also be reassuring.
Above: Packets of business records awaiting appraisal before transfer to the archives
With this in mind what is gold’s role within a multi-asset class portfolio?
The absence of a dividend or coupon not only makes gold difficult to value, but it also makes it difficult to view as a predictable source of investment return. Instead, gold is best viewed as adding a degree of tangible diversification to portfolios – as an asset that can spread some of the risk attached to other assets such as inflation for bonds and cash and even sometimes equities.