Holding gold in a balanced portfolio can provide useful diversification benefits, and historically has maintained a low correlation with most major asset classes.
Gold is often more sought-after when conditions are increasingly uncertain, or more volatile elsewhere. Unprecedented events, like the COVID-19 pandemic, can drive investors to search for relative “safe havens” such as gold.
Gold could be useful as an inflation hedge when inflation comes as a “shock” due to external factors, when prices escalate faster than expected or when central bank measures are ineffective.
The gold price dipped -0.4% in Q4 2024, the first quarterly decline since Q3 2023. However, the price of the yellow metal rose 27.2% in 2024 for its strongest annual return since 2010.
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Investing in gold
Today, gold plays an important part in some investors’ portfolios, for a variety of reasons. From central banks wanting to diversify their reserves to individuals wanting physical assets that may retain value over time. Find out more.
The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested.
Instruments providing exposure to commodities are generally considered to be high risk which means there is a greater risk of large fluctuations in the value of the instrument.
If the issuer cannot pay the specified return, the precious metal will be used to repay investors. Investors will have no claim on the other assets of the Issuer.
Data as at 3rd March 2022, unless otherwise stated.
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