Last week we let you know that our view on investing in gold has become more positive. At our recent Asset Allocation Committee meeting, we introduced a weighting specifically to gold in client portfolios, including across clients’ Ready-made Portfolios. This is the core view of the committee, as it decided to reduce risk in portfolios by changing the asset allocation and by discussing defensive options. Physical gold acts as a form of diversification and offers defence against the risk of global competitive currency devaluation.
Gold: why now?
Gareth Lewis, Chief Investment Officer and manager of the funds, said, “we have been keen observers of the growing market distortions created by global monetary policy. With Central banks losing control of the macroeconomic environment, we believe policies such as Quantitative Easing will become discredited."
“As a result, we have reduced equity exposure within our Ready-made Portfolio range of funds and in its place introduced a position in gold for the first time. Gold has a low correlation with other risk assets and serves as a defensive option should all the world’s Central banks spark a round of competitive currency devaluation by loosening monetary policy further. In a world with low, and even negative, real interest rates the opportunity cost of us providing this protection is low.”
As mentioned in our previous article, our favoured route to access this commodity is via a physical gold ETC, and we have chosen to use the ETFS Physical Gold GBP ETC (PHGP) from ETF Securities, which is a low-cost and liquid investment option.
We have become increasingly cautious on the prospects for risk assets as global growth has slowed despite the weight of stimulus. The risk of policy error is growing as authorities across the developed economies struggle to stimulate demand. We have been tactically underweight both equities and high yield since the summer and the move to include gold completes our phased move to de-risk our portfolios.
To discuss this or anything about your investments, please call us on 020 7189 2400, email us at email@example.com or request a call back.