HOME > Market Analysis > Dukes Announcement

Multipurpose gold

As a safe-haven asset, gold has always had its own particularities, but in fact, gold is by no means so simple as a safe-haven asset.

Frank Holmes, chief executive of US Global Investors, pointed out that gold plays a significant role in hedging risks and diversifying assets.

In the demand side of gold, China and India have great love for gold ornaments and gold itself.

From the beginning of the holiday season in India in September each year until the end of the Chinese New Year in February of the following year, both China and India have extremely strong demand for gold.

In terms of safe-haven demand, negative interest rates and market concerns about central bank policies in various countries tend to drive demand for gold. When investors worry about the decline in the prices of other assets, they will always turn to gold.

Looking at the role of gold in the portfolio, it has always provided a hedge against inflation.

Holmes pointed out that in the investment portfolio, 10% of gold-related assets should be allocated, of which 5% are gold or gold ornaments, 5% are gold stocks, mutual funds and ETFs.

In this current economic environment, the value of gold may become more prominent.

Global stock markets have been in the bull market for a long time, and Trump’s tax cuts have also boosted the stock market. The characteristic of gold is that its correlation with the performance of the stock market is very small. In the past 30 years, there was only a negative correlation of 0.06 between the LBMA gold price and the S&P 500 index. It also means that gold is a weapon to hedge stock market risk.

Previously, gold has performed quite well in comparison with other assets over the past few decades. Therefore, gold is an excellent choice for diversification.