The view of precious metals as a necessary asset to help diversify a heathy portfolio is popular among seasoned professionals in the financial sector. Looking at their reasoning can give us valuable insights on a modern portfolio.
Financial institutions such as UBS and Citigroup have recommended gold recently.
In September of this year, the regional chief investment officer at UBS Global Wealth Management, Kelvin Tay, told CNBC’s Squawk Box, “In [the] event of uncertainty over the U.S. election and the COVID-19 pandemic, gold is a very, very good hedge.” This analysis makes sense, given gold’s longstanding reputation.
Citigroup analyst Aakash Doshi also spoke in favor of gold recently. He noted the election as just “one reason why we expect gold prices to hit fresh records before year-end.” Gold is often considered a “safe-haven” asset in times of rising political uncertainty.
However, election anxiety is far from the only reason many are looking into gold. Other portfolio holders seek precious metals for a variety of purposes.
Financial managers have also been looking to add gold to their own portfolios.
According to Forbes, Omega Advisors CEO Leon Cooperman recently said, “I bought gold for the first time in my life a week ago. I understand the case for gold. We’re on the way to some banana republic situation. Nobody’s worrying about the debt that’s being created.” His reference to debt is most likely in reference to the $3.1 trillion federal deficit for 2020. Gold has long been viewed as a hedge against the risks associated with a ballooning national debt.
Michael Kelly, global head of multi-asset at PineBridge Investments, is more concerned with low interest rates, telling The Wall Street Journal, “This is crystal clear: Financial repression is coming even to the U.S. and the U.K., and there will be negative real rates as far as the eye can see.”
Markets Insider recently laid out the case for owning gold.
A recent Markets Insider article stated that the main reasons for purchasing physical gold are its status as an inflation hedge, as a counterweight to stocks, and as a safe haven during times of uncertainty. The article also described the metal as “virtually indestructible.”
Consider these concerns and insights here when you are planning your own portfolio.