When life gets tough, we tend to look for comfort and support in the people or things that are most familiar to us - those that we trust and that we know we can rely upon. Like an old friend. With chaos and uncertainty abound in the world economy, gold is once again showing its mettle. This old friend is something clear cm has always kept close by.
Many investment managers of certain portfolio structures will hold a percentage of gold. Typically, this will be around 3% or 4% of the overall asset holding. The team at Clear CM has designed its range of Model Portfolios as medium or long term investments. We therefore believe that gold as an asset is much more beneficial than the above percentages might suggest, because it helps greatly with diversification. This is why gold tends to make up something in the region of 18% of the total assets across Clear CM’s Absolute Return Fixed Weight portfolios.
In our opinion, market volatility will certainly increase in the future. This, combined with the relative long term strength of gold, suggests our allocation is on the right lines.
Current analysis* up to the end of the third quarter of 2017 shows that gold is proving once again to be a steady bet. While the global price of gold may have marginally slipped over the past 12 months, the three-year data shows a steady increase equating to around 2.5% per annum, and the last 10 years have seen growth averaging around 5.5% per annum. Added to that, despite the slight downgrading of gold over the last year, it actually showed a strong revival in the third quarter.
In the UK, we have that political and economic millstone called Brexit, which has coincided with sharp decreases in the value of Sterling. More significantly, we have the genuine reality of foreseeable uncertainty - so who knows what more volatility is around the corner? World debt continues to climb, and commentators have predicted that the dollar-based financial system could struggle without a change in direction.
Gold, meanwhile, remains that trusted little nugget in the financial market. It’s real, it’s solid, and it can’t be reprinted by governments forced to devalue their currencies. Gold will hold its own, with relatively minimal fluctuations, while retaining the ability to be traded against other valuable commodities, like oil.
As an old friend, there’s nothing quite as good as gold!
*Source: Bloomberg Gold US Spot Price (16/11/17)