Gold – Does it Belong in a Portfolio?

by Erika Nolan

In one word—yes. You bet it does.

It’s true that US markets reached new highs this month: the S&P, the Dow and NASDAQ have all been closing at record highs on an almost daily basis. Yet those who like to err on the side of caution are wondering how much further these markets can run before things fall apart.

Gold – Does it Belong in a Portfolio?There are well-respected economists and top fund advisors who agree that the financial picture is not rosy. It’s running through Japan, Europe and now the UK, as they wrestle with the reality of exiting the EU.

Sluggish GDP growth of barely 1% in the Western world has forced central banks to unprecedented actions. With nearly non-existent interest rates in the US, Canada and Britain—and negative rates in Japan, Switzerland, Denmark, Sweden and the EU—it’s a time that carries serious economic risks.

The US economy is plagued by its own economic flu, but the fever hasn’t spiked as high as some others. Investors from around the world are piling into the US markets and the dollar in hopes that the US will stay healthier than the rest.

As central banks continue their economic experiment, the results are warping the banking sector and distorting how businesses and investors invest. It is also altering how retirees save. These experiments create misallocation of capital and bubbles that governments and central banks have blown always burst, often with spectacular effects.

In today’s new normal, some believe that old stores of wealth, like gold, are no longer relevant. But gold has played a role in every major financial reset in history, and is still viewed as the only true form of hard currency. Last week, the World Gold Council reported that investment demand for gold surged to more than 1,000 tons for the first time in history during the first half of 2016.

That level of demand shows how much fear and concern there is that bubbles could burst sooner than anyone expects. Every investor should have a minimum of 10% of their portfolio in physical gold—coins or bars.


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