New report urges investors to review risk allocation strategy


Categories: Investment

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The World Gold Council has today released its latest quarterly investment journal, Gold Investor, which includes the research paper; Gold holdings: ample room for growth in a broad and liquid market. The paper highlights how the rapid growth of ‘paper’ assets driven by financial innovation, expansionary monetary policies and global imbalances in capital accumulation and borrowing has increased the potential for extreme market events. Investors should look at ways to balance their search for yield with protection against market risk. Gold has an important role to play in both mitigating these risks and preserving wealth.

The paper argues that far from being ‘over-bought’, gold holdings remain a very small proportion of investors’ portfolios due to the unprecedented growth of other financial assets. Consequently many investors are taking disproportionate levels of risk, without seeking to take mitigating action with an allocation to one of the staples of financial planning in their portfolios - gold.

Marcus Grubb, Managing Director, Investment at the World Gold Council said:

“From 2000 to 2012, debt markets grew three-fold, to almost US$90 trillion, while equity markets increased by US $20 trillion to US $51 trillion. In contrast, the private investment stock of gold sits at just US$ 1.8 trillion. This expansion of ‘paper’ assets has increased the frequency and magnitude of tail-risk events. Given this, a closer look at strategic allocations to gold in order to mitigate risk is warranted.”

“Research by Oxford Economics, New Frontier Advisors, Mercer, and the World Gold Council among others, has consistently demonstrated that gold has a valuable long-term contribution to make to managing risk and preserving wealth. Despite this most investors remain under allocated relative to the optimal levels identified of between 2% and 10%1.”

"Recent price moves driven by short term trading have dominated the headlines, but the long-term drivers of gold; including emerging-markets growth, central-bank demand and constrained supply, remain firmly in place. We are witnessing one of the strongest buying waves of physical gold in many years as consumers in the US, India and China take advantage of the current price to increase their holdings.”

This edition of Gold Investor also includes an investment commentary from the first quarter of 2013 and papers on gold’s role in the ‘Great Rotation’ and how investors can protect their portfolios from the impact of fiat currency debasement.

1A summary of these results can be found in Gold in the ‘Great Rotation’, Gold Investor, Volume 2 and Tail-risk hedging: an international perspective, Gold Investor, Volume 1.

View the full report

For further information please contact:

James Murray
World Gold Council
T +44 20 7826 4754
E [email protected]

Giles Abbott
Capital MSL
T +44 20 7307 5340
E [email protected]