|
|
|
|
investment portfolio
|
|
MICHAEL
BLOOMSTEIN
30 Gloucester Road, Brighton, BN1 4AQ
Tel: 01273 608374 Email:
info@bloomsteins.co.uk |
 |
Portfolio
diversification
Most investment portfolios are invested primarily in traditional
financial assets such as stocks and shares. But a healthy portfolio
includes a wide range of assets, including an allocation of 5-15% of
wealth to gold-related investments and gold bullion; the reason
being to protect the portfolio against fluctuations in the value of
any single asset or group of assets that react in a common fashion,
ie. Not having all your eggs in one basket. Portfolios containing
gold are generally more robust and less volatile than those that do
not.
Inflation hedge
Market cycles come and go, but, over the long term, gold keeps its
purchasing power. Its value, in terms of the real goods and services
it can buy, has remained remarkably stable. In contrast, the
purchasing power of many currencies has generally declined due to
the impact of rising prices for goods and services. As a result,
gold is often bought to counter the effects of inflation and
currency fluctuations.
Dollar hedge
Gold is often used as an effective hedge against fluctuations in the
US dollar, the world’s main trading currency. If the dollar
appreciates, the dollar gold price falls, while a fall in the dollar
relative to the other main currencies produces a rise in the gold
price. While this may also be true of other assets, gold has
consistently proved among the most effective in protecting against
dollar weakness.
Risk management
On the whole, gold is significantly less volatile than most
commodities and many equity indices. In this respect it tends to
behave more like a currency. Including assets with low volatility in
a portfolio will help reduce the overall risk, with beneficial
effect on expected returns. Risk factors that may affect the gold
price are quite different in nature from those that affect other
assets.
Demand and supply
As is true of all asset prices, gold’s price moves in response to
the changing balance between supply and demand. Mine production is
relatively inelastic due to the long lead times that exist in gold
mining, which explains why the rally in the gold price since 2001
has still not engendered an increase in production levels.
Meanwhile, demand has shown sustained growth, due at least in part
to rising income levels in gold’s key markets. This has created the
foundation for the most positive outlook the precious metal has
known for a quarter of a century. |
|
terms & conditions |
privacy statement |
site map |
contact us | © bloomsteins 2009 |
|
|
