Why It Matters
Diversification is the bedrock of a resilient portfolio, and gold’s low correlation with stocks and bonds makes it an ideal diversifier. When equities or fixed-income assets decline, gold often holds steady or appreciates, reducing overall portfolio volatility.
Investment Strategy: Core-Satellite Approach
Incorporate gold using a core-satellite approach. The “core” of your portfolio (60-70%) consists of stable, long-term investments like index funds or bonds, while the “satellite” portion (5-10%) includes gold to enhance diversification. Rebalance annually to maintain your target allocation, selling gold when it outperforms and buying when it underperforms to capitalize on market cycles.
Key Statistic
A 2023 study by the World Gold Council found that portfolios with a 5% gold allocation reduced volatility by 10% and improved risk-adjusted returns by 7% over a 10-year period compared to portfolios without gold. In 2024, gold’s negative correlation with the S&P 500 (-0.12) further highlighted its diversification benefits.
