New Mercer study underscores benefits of gold as an asset class

News Arnulf Hinkel, Finance journalist – 09.03.2017

New Mercer study underscores benefits of gold as an asset class
“Gold as an asset class for institutional investors” is the recently published third revised and updated edition of a study previously conducted in 2011 and 2014. The analysis focuses on the long-term effects of gold as an addition to an institutional standard portfolio consisting of European large-cap stocks and Eurozone government bonds. The qualitative analysis was performed with the aid of historical market data, taking various market phases into account. The analysis compares the performance of a pure stock/bond portfolio with that of a stock/bond portfolio containing a five per cent gold addition. The assessment period of the recent analysis is January 1989 to December 2016.

As in the previous studies, Mercer concluded that an addition of gold in a volume as low as five per cent can constitute a sensible portfolio diversification. The risk reducing effect of gold was once again confirmed, as the correlation of both stocks and government bonds is decisively negative in the case of a capital market crisis. This means that generally speaking, the gold price develops in the opposite direction compared to that of stocks and government bonds. But also in the entire study scenario, which is based on an assumed 85 percent chance for a crisis-free market development, the addition of gold provided a moderate benefit. A comparison shows: the portfolio containing gold reached every target return within the entire return range with a lower loss risk than the pure stock/bond portfolio.

The study is available here www.xetra-gold.com/mercer-study for download, free of charge. 

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