Asset Diversification and Wealth Preservation Specialist

Gold Investment Services

Why would an investor buy gold?

As a global currency, an investment and simply a thing of beauty, gold has held an allure for thousands of years. For the investor, that allure is largely to do with gold's proven ability to preserve value over time and be a good diversifier within a portfolio. Gold has many uses in a diversified portfolio, none more important then as a risk management component. Below we have outlined some of the main reasons for an investor to consider holding gold.

Top reasons to invest in precious metals

• Diversification of assets; a central theory of portfolio theory is asset diversification. By spreading ones assets across multiple asset categories, returns can be stabilised and down side risk can be reduced. Many economists believe that gold should be included as part of a well diversified portfolio.
• Macro economic hedge; as the world becomes increasingly integrated in terms of economics, resources and culture ? systemic risks become far more transient in nature. Events in one part of the world can have an immediate and lasting effect upon many other parts. Highly integrated economies, such that have emerged in North America, Europe, may offer many advantages in terms of economic use of services and materials but at the same time they are increasingly prone to single events. These events may cause a cascade of knock on events through the wider global economy. The Asian monetary crisis of the early 1990's is a case in point. Fred Bergsten of the Institute for International Economics
• Hedge geo-political risk; the enormous trade imbalances that are currently evident in the global economy may lead to geopolitical tensions. Currently the US is running a trade imbalance of $800 Billion per year; this amounts to borrowing $5Billion each working day, just to keep the lights on. The rising oil price followed by Chinas ascension as an economic powerhouse means that the global economic landscape is changing. No one yet knows how it will play out, but one can be certain - change is upon us.