Someone wishing to use gold as a macro hedge in a medium term portfolio would be better off going direct to bullion rather than using miners
Someone wishing to use gold as a macro hedge in a medium term portfolio would be better off going direct to bullion rather than using miners. The choice between the equities of gold miners and gold bullion in framing portfolios depends on investment objectives but the advantages equities once had seem to be diminishing. This is one of the conclusions from a PortfolioDirect study using gold bullion price data (daily and monthly) in conjunction with the NYSE ARCA HUI equity index data from 1996-2013. The volatility in equity returns is higher than the volatility in bullion returns. Overall, when (monthly) gold prices have risen, equities have risen faster 60% of the time. When gold is falling, equities have fallen by less 22% of the time. Equities have offered a better outcome than bullion 43% of the time. Even during 1996-2003, this was only 45%.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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