Gold as diversifier is often underestimated

Gold traditionally enjoys a good reputation as a safe haven and inflation hedge. In addition, investors value the precious metal’s long-term performance. In recent years, it has also significantly contributed to the overall performance of investment portfolios. Despite the recent consolidation phase, the price of gold in the Eurozone has thus far increased by almost 10 per cent in 2025. Still, the function of gold as an ideal tool for portfolio diversification is often underestimated. The precious metal offers better protection against stock market losses than most other asset classes.

Top performer of the last 50 years: a pure equity/gold portfolio

In his analysis on Forbes.com in late June 2025, Alex Shahidi, managing partner at Evoke Advisors and host of The Insightful Investor podcast, explained how a portfolio consisting of 50 per cent gold and a broadly diversified global equity basket for the remaining 50 per cent would have outperformed every other asset class since 1975. This is not surprising as the stock market has seen an excellent overall performance in spite of the various crises and the gold price recorded a more than 14-fold rise in the Eurozone over the same period.

Negative or inverse correlation: gold unique as a diversifier

While the performance of gold is largely independent of stocks, bonds, currencies and most other commodities in positive economic phases, this correlation turns negative in times of geopolitical and economic crises. The allocation of gold to a portfolio can thus offset or at least mitigate losses from stocks and commodities such as oil or industrial metals. In his analysis, Shahidi was able to demonstrate that during six of the seven major US bear markets since the end of the gold standard in 1971, gold effectively supported portfolio performance with its average price increase of 17 per cent. At the same time, the precious metal increased risk-adjusted returns and reduced the overall volatility of portfolios.