Research library

How gold’s role in a portfolio differs from cryptos

Weak Q4 set the seal on an 11-year low for annual 2020 gold demand

The COVID-19 pandemic raised uncertainty by both compounding existing risks while creating new ones. But by the end of last year, investors were optimistic that the worst was over. 

Our analysis illustrates that adding between 3% and 11% in gold to an average European investor’s portfolio over the past decade would have resulted in higher risk-adjusted returns.

Gold-backed exchange-traded funds and similar products (gold ETFs) have flourished since their introduction in 2003, attracting both institutional and retail investors across the globe. Recently, gold has become globally accepted as a strategic asset amidst a high-risk and low-rate environment spurring investment demand and the expansion of the gold-ETF market.

Gold benefits from diverse sources of demand: as an investment, a reserve asset, a luxury good and a technology component. It is highly liquid, no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time.

Demand for gold loans, both through banks and non-banking financial companies (NBFCs) has grown in response to the economic impact of the COVID-19 pandemic.