A strategic asset for UK portfolios!

Gold can enhance a portfolio in four key ways! 

World Gold Council published the report, the relevance of gold as a strategic asset, UK edition! The report say that the Gold, a strategic asset for UK portfolios! “Our analysis illustrates that adding between 2.5% and 12.5% in gold to an average UK investor’s portfolio over the past decade would have resulted in higher risk-adjusted returns!” 

Gold can enhance a portfolio in four key ways, 1: generate long-term returns, 2: act as a diversifier and mitigate losses in times of market stress, 3: provide liquidity with no credit risk & 4: improve overall portfolio performance.

New decade, renewed challenges: As the new decade begins, investors face an expanding list of challenges around asset management and portfolio construction. Among these, 1: Low interest rates, which may push investors to seek riskier assets at elevated valuation levels and, for UK pension funds in particular, may increase the value of liabilities, possibly reducing their funding ratio. 

2: Continued financial market uncertainty ranging from geopolitical tensions, to expectations of diverging global economic growth and an increase in asset volatility. 

We believe that gold is not only a useful long-term strategic component for portfolios, but one that is increasingly relevant in the current environment. The increased relevance of gold Institutional investors has embraced alternatives to traditional stocks and bonds in pursuit of diversification and higher risk-adjusted returns. 

The share of non-traditional assets among global pension funds increased from 7% in 1998 to 26% in 2018 Gold allocations have been recipients of this shift. It is increasingly recognised as a mainstream investment as global investment demand has grown by an average of 14% per year since 2001 and the gold price has increased by almost six-fold over the same period. 

The principal factors behind this growth include, 1: Emerging market growth, 2: Market access, 3: Market risk, 4: Monetary policy & 5: Central bank demand.