Gold preserves capital and protects against risk for UK investors, latest World Gold Council research shows
Published 10 July, 2012
The World Gold Council has today launched its latest research entitled “Gold as a strategic asset for UK investors”, which examines gold’s role within a sterling-denominated investment portfolio. Using data spanning over 25 years, the report demonstrates that an allocation to gold helps investors obtain equal or better average returns, while incurring less volatility and reducing the maximum monthly losses.
Against a backdrop of sustained market turmoil and wealth erosion, investors are seeking a trusted source of security for their holdings. The report shows how gold can fulfil this role by acting as a consistent portfolio diversifier – managing risk and mitigating potential losses in the portfolios of UK investors, an imperative in the prevailing environment.
Marcus Grubb, Managing Director, Investment for the World Gold Council, said:
“These extremely challenging times mean it’s impossible to quantify the risks for UK investors. They are facing an unprecedented combination of threats to their assets including extreme and unexpected market shocks that can trigger widespread value destruction.
“As UK investors reduce allocations to traditional investments such as equities and bonds and increasingly dash to cash, they face a double whammy, with the potential for stagnation of capital due to the lack of returns from cash and the increased possibility of inflation as a result of ongoing monetary stimulation. In this context, an urgent reappraisal of how to protect and create wealth is required and our latest research reinforces gold’s credentials as a core portfolio asset which reduces losses and preserves wealth.”
Juan Carlos Artigas, Global Head of Investment Research commented:
“There is robust evidence for adding gold as a foundation to investors’ portfolios; risk-adjusted returns increase, losses diminish and capital is preserved. The optimal strategic allocation to gold for sterling-based investors ranges between 2.6% and 9.5% depending on their specific risk tolerance and assets they hold. This potential for investors to avoid a significant loss or increase portfolio gains, by adding gold, is especially important during extreme market events.”
The paper uses the Michaud unique Resampled Efficient Frontier™ optimisation technology to allow analysis of the statistical significance of gold for adding diversification value. Five portfolio allocations representative of a wide range of UK investors were tested: conservative, moderate conservative, moderate, moderate aggressive and aggressive. The optimal allocations are consistent with those highlighted across other currencies and in almost every economic scenario.
The full report can be viewed at: www.gold.org/news-and-events
For further information please contact:
World Gold Council
T +44 207826 4754
T +44 20 7307 5307