3 Ways to Diversify Your Portfolio With Gold

27-May (USNews) — Gold is considered to be the world’s first currency. The yellow metal was melted into gold coins created by King Croesus of Lydia around 550 BC and circulated in many economies well before the creation of paper money. Today, Western investors view gold as an alternative asset, a commodity, a quasi-currency, a portfolio diversifier and an inflation hedge. So-called “gold bugs” invest in the metal to protect against global gloom-and-doom scenarios. But average investors might want to diversity into gold as well, experts say.

…Portfolio diversifier. The goal of any balanced portfolio is diversification, and gold can play a part, experts say. “You want a portfolio of noncorrelated assets, and the statistical correlation between gold and stocks is virtually zero,” says Jeff Christian, managing director at New York-based CPM Group, a commodities research consulting firm.

Returns aren’t too shabby, either. From 2001 through 2014, the annualized return for holding gold bullion was just over 12 percent, according to Peter A. Grant, chief market analyst at USAGOLD, a Denver-based coin and bullion investment firm.

“An allocation to gold has been shown to protect and enhance returns while reducing volatility,” Grant says.

Safe haven. Gold has traditionally been viewed as a safe investment that climbs in value during times of geopolitical crisis or political instability. “A lot of people who invest in gold look at it as insurance in your portfolio against catastrophic financial market failure, severe economic problems or war,” Christian says.

…”Gold is first and foremost money. Money that cannot be printed or debased. It therefore insulates its owner from the negative outcomes historically associated with fiat [paper] currencies,” Grant says.

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