Gold is a strategic safe-haven asset that continues to play a key role in diversifying investment portfolios. Throughout history, it has remained the ultimate store of value, precisely because it maintains or increases in value during periods of economic uncertainty.

For any investor, allocating all his savings to a single asset is very risky because it exposes him to the ups and downs of a single market. That is why it is recommended to diversify investments across assets so that gains in some securities can offset unexpected losses in others.

One characteristic of gold that sets it apart from most financial assets is that its demand comes from various quarters, from central banks and private investors, who accumulate bullion and coins of this precious metal, to the jewellery industry and electronic device manufacturers, who use it in the creation of their products.

This is precisely the reason for its intrinsic value, which carries no credit risk, cannot be inflated, and has remained unchanged throughout history. In other words, unlike fiat currencies, gold is not subject to devaluations caused by monetary policies or economic factors.

This unique characteristic makes it particularly attractive for diversification and return on savings in times of economic uncertainty. Gold’s ability to maintain its relative value in the face of currency fluctuations makes it a trusted asset for investors and households seeking protection against inflationary risks.

We are seeing this in the current economic context where, for example, for many Chinese families, buying gold has become the safest investment, given that the real estate sector has collapsed and the stock market and currencies have lost their stability. Francesc Canals, correspondent for TV3 and Catalunya Ràdio in Beijing, explains how in recent months, the shopping centres dedicated to the sale of gold “have become veritable pilgrimage centres for Chinese families seeking to invest the savings accumulated during the years of pandemic confinement”.

The strategic role of gold

A report published by the World Gold Council (WGC) on 28 March details the three key attributes that make gold the ideal asset to complement and enhance an investment portfolio.

Generating long-term returns. Historically, it has had positive long-term returns, both in good times and in economic downturns. The diversity of its sources of demand gives gold particular resilience and the potential to generate strong returns in a variety of market conditions.

Diversification that works. The value of many assets follows the same pattern as market uncertainty increases and volatility increases. This is not the case for gold, which has a negative correlation with increased selling of equities and other risky assets.

A large and liquid market. The gold market is large, global and very liquid. The WGC estimates that investors’ and central banks’ holdings of physical gold amount to approximately $5.1 trillion, to which must be added $1.0 trillion in open interest through derivatives traded on exchanges or over-the-counter (OTC).

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