New study on the ideal gold allocation in a portfolio
News Arnulf Hinkel, financial journalist – 28.04.2025
Former studies such as ‘Gold as an asset class for institutional investors’ by the management consultancy Mercer provide sufficient evidence that the risk-adjusted performance of a portfolio can be optimised by adding gold to a typical stock/bond portfolio. In its latest study ‘Gold as a strategic Asset: 2025 Edition’, the World Gold Council analysed the impact of varying gold allocations and their role within different investment horizons, also taking into account changes in portfolio volatility and the effect on unadjusted performance.
‘Gold effect’ greater for longer-term investment periods
The World Gold Council study analysed investor portfolios over periods of three, five, ten and twenty years. For each period, the study analysed portfolio performances without a gold allocation as well as with an addition of 5 per cent. An important result: the characteristic of gold, which tends to develop in the opposite direction to stocks and bonds in times of crisis, is more noticeable over longer periods. While the risk-adjusted return of the portfolio for a three-year gold allocation was only 1.3 per cent higher than that of a pure stock/bond portfolio at 22.8 per cent, it was 3.6 per cent higher for a 20-year period. Notably, the performance of portfolios not adjusted for risk which included gold was also higher than that of portfolios made up only of stocks and bonds, by an average of 0.1 to 0.2 per cent p.a. across all investment periods.
Lower portfolio volatility independent of investment period
In the study, gold also proved its role as a portfolio stabiliser. Notably, the investment horizon hardly played a role: for all investment periods, portfolios which included gold saw a 0.3 to 0.4 per cent lower annualised volatility. Moreover, a mathematical model taking into account various risk levels with their respective volatilities shows that the performance of a stock/bond-based portfolio which includes a gold allocation tends to develop even more favourably at higher risk levels than in low-risk phases.
