Does gold continue to be a strategic asset?
Team Veye | 15 Mar 2021
Gold continues to be considered a strategic asset because of its multiple benefits. Although, for a long time, its importance as a strategic portfolio asset has been undervalued.
Gold benefits from diverse sources of demand. It has always been considered as a safe investment apart from being used as a hedge against inflation. It normally attracts flows when the economy is down and also amid falling interest rates.
Gold has essentially such characteristics which make it different from other assets. It has delivered better long term, risk adjusted returns than other commodities.
Gold is a more effective diversifier than other commodities. Gold as an investment has performed broadly in line with the S&P 500 over the long term. But, when compared to commodities, gold has outperformed not only broad-based indices but sub-indices and most individual commodities too
While there are numerous ways for investors to own gold, such as bars, coins, derivatives, over-the-counter (OTC) instruments and gold stocks, many have embraced gold ETFs for qualities such as cost efficiency, transparency, and liquidity.
The growth and evolution of gold ETFs have already helped advance the broader gold market and are likely to continue to do so, providing additional support for the role of gold in portfolios.
Gold, though purchased mainly for jewellery and as a reserve asset has a technology component too. The use of gold across energy, healthcare and technology is changing rapidly. Gold’s position as a material of choice is expected to continue and evolve over the coming decades.
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