The Role of Gold in an Investment Portfolio

As stock markets gyrate with each new economic crisis in the U.S. and abroad, advisors are scrambling to find ways to protect against a precipitous market slide. Can you assure your clients that their portfolios have effective insurance against a severe jolt to the capital markets?

More and more advisors are adding physical gold, the ultimate “hard asset,” to their portfolios. Gold is not correlated to the stock market and has universal value. It is often considered an alternative currency. Following the financial crisis of five years ago, the physical gold market has become more efficient and pervasive. Advisors may not be aware that they can buy and sell physical gold as easily as stocks or ETFs.

There is no need to hold physical metal at your home or in a safe deposit box any more. There is no longer personal risk in handling and managing this asset. Technology has enabled investors to easily buy and sell gold and silver from their PC, on their smart phone and tablet. Physical gold is stored in vaults throughout the world and is regularly audited and secured.

Gold is a rare non correlated asset that is often used as an inflation hedge. You will also read that it is used as a safe haven from economic catastrophes. Both true. Although it’s primary function is to be an asset that is not in the hands of governments and corporations.

Gold for some may be a speculative investment but for the most part it is more of a quasi-insurance program. Because of its internationally recognized value and its market size, gold is an alternative asset that is easy to hold and liquidate.

Gold is an investment that has been in use as currency for over 5,000 years. It was first found quoted on tablets for exchange against other commodities. But it truly became pervasive once the manufacture and use of coin became common in ancient Lydia.

Both gold and silver were important in trade throughout the western world and became an important form of exchange with the east. In fact without gold and silver coins from the Spanish Empire the United States of America may never have been able to become a successful experiment as this newly formed country had difficulty with any paper money schemes at the time.

In a time when technology allows the free exchange of physical gold, it is important that advisors recognize the value of gold to individual investor. If the world’s most powerful governments hold gold through the Central Banks in their portfolio, why wouldn’t you?

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