How to Increase Portfolio Performance with Precious Metals During Inflation

The comments below are an edited and abridged synopsis of an article by Georgina Tzanetos

Precious metals have long been considered a play against inflationary investment periods, and a new study confirms their value as a hedge. Precious metals are used for industrial processes or hold significant economic value, and they’re a crucial part of a balanced portfolio when prices start to surge.

How to Increase Portfolio Performance with Precious Metals During Inflation - BullionBuzz - Nick's Top Six
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Precious metals include gold and silver, but also platinum group metals (platinum, rhodium, palladium). Gold in particular is used as an international store of value.

Precious metals can toggle the volatility of a portfolio back to center during the big equity swings markets have endured in the past few weeks.

Economists analyzed the spillovers and resource allocation qualities of nine precious metals and equity markets in a 2021 study. They looked at the relationship between gold, silver, palladium, platinum, nickel, lead, zinc, copper and aluminum. They found that nickel and lead were the least desirable to mitigate risk, with gold being the most desirable metal for investment.

Another study, published in 2020, found that there is no spillover among gold and equity markets, meaning investors can invest in equities and gold to diversify the risks within their portfolios.

Not all precious metals are created equal. Research found that the largest spillovers among precious metals occur between gold and silver and between zinc and lead.

It’s important for investors to remember that the prices of precious metals do not always follow the prices of equities. Precious metals can be bought on their own, or through funds like ETFs.

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