Gold has historically been viewed as a hedge against inflation and a safe-haven asset. As the equity markets climb ever higher and experience ultra-low volatility, memories of the days before the financial crisis bring up concerns of when, not if, a market correction will happen. Will gold have a seat at the table?
Downside protection: Gold has provided a hedge to a 60/40 portfolio in down-market periods, with similar returns in up markets. Volatility has been lower with gold in the portfolio.
Asymmetry: Gold's record as an inflation hedge has been less than 1:1 as of late, but data show gold to be a good equity hedge in most down markets with limited offsetting impact in up markets.
Liquidity exists: Gold ETFs have increased in popularity and availability, with assets close to $90 billion. Net asset flows often mirror spot changes in size and direction. Institutional investors have been active among the two largest gold ETFs – SPDR Gold Shares and iShares Gold Trust.
*January 2001 to September 2017. Sources:
Bloomberg LP, Morningstar Inc.
Compiled and designed by Charles McGrath and Gregg A. Runburg