Why gold is good for you, in small amounts

Volatility is high, but so are the diversification benefits.

Ben Johnson, CFA 30 August, 2016 | 5:00PM

Gold is traditionally sought after as a store of value in times of severe economic dislocation, an insurance policy against financial Armageddon. Its historically low to negative correlations with most broad asset classes indicate that gold might be a worthwhile investment for a small portion of an investor's portfolio.

While gold has exhibited a low level of volatility relative to equities over the past quarter century, the massive price swings experienced from the early 1970s through the mid-1980s -- as well as its sharp sell-off in 2013 -- demonstrate the effects of fickle investor sentiment.

This type of volatility also underscores why an allocation to gold should probably occupy only a small portion of a well-diversified portfolio. As for an investment in physical gold through an exchange-traded product (ETP), gold ETPs are the least costly, most broadly accessible, and most liquid vehicles for acting upon one's gilded aspirations.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

About Author

Ben Johnson, CFA

Ben Johnson, CFA  Ben Johnson, CFA, is director of global ETF research for Morningstar and editor of Morningstar ETFInvestor, a monthly newsletter.

© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies