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Having up to five per cent gold in your portfolio considerably reduces the risk of loss , says Mercer study


Having up to five per cent gold in your portfolio considerably reduces the risk of loss, according to a new study by Mercer.

The study examines the effect of holding a certain proportion of gold on the performance of a portfolio of large-cap shares and government bonds. To this end, it defines two different scenarios: a normal market environment scenario and a stress scenario. In a nutshell, investment in gold was shown to be a sensible diversification of a portfolio, particularly in times of crisis. The study also shows that adding gold reduces the risk of loss in achieving any target return or that the expected return for any targeted risk of loss is higher.

“For institutional investors who are not permitted to make direct investments in gold for regulatory reasons, we consider ETPs to be a suitable form of investment for participating as directly as possible in the performance of the gold price,” says Dr Heinz Kasten von Mercer. “However, we should take into account whether this ETP is secured by physical gold and its market price is thus directly coupled to the gold price. In addition, investors should ask themselves whether the price of the ETP will perform systematically differently from the gold price over time, for example through a certain fee structure.


Martina Gruber, managing director at Deutsche Börse Commodities GmbH, says: “Xetra Gold is the only product on the market that is backed by physical gold and doesn’t show a tracking error because the management fees are not taken out of the portfolio,” said”It is the first choice for institutional investors because it’s inexpensive, flexible and very safe.”

Steffen Orben, managing director at Deutsche Börse Commodities GmbH, says: “Since mid-2010, insurance companies in Germany have also been allowed to purchase Xetra Gold for their restricted assets in the amount of up to 5 percent of their commodities investment. The Mercer study proves that the risk of loss can be considerably reduced in this way.”

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