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Want to Diversify with Gold? BullionVault’s Calculator can Help

investment China banks holding low gold reserves but may be misreporting and manipulating international currency markets.

Want to Diversify with Gold? BullionVault’s Calculator can Help

Gold has been used as a safe haven asset for decades and has protected the wealth of many investors throughout various economic crashes, but having a good understanding of the percentage of gold to include within your portfolio can at first seem like a tricky question to answer. There are a number of factors that come into play when you are balancing your asset classes ranging from the timeframe you are investing on to your general tolerance to risks and bull and bear markets which can have an impact on your allocation. 

BullionVault is a vaulted gold investment platform with coverage both in the UK, USA and wider markets. 

Their gold investment calculator shows the impact that allocating a proportion of your investment portfolio in gold would have over various timeframes and market conditions. 

The impact of having a portion of gold in your portfolio will depend on the allocation, but you are essentially paying a premium to protect the investment over your investment timeframe. 

The table below shows the impact that some of the most common gold asset allocations would have had on a simple stocks and shares portfolio. The data shows that gold protects against losses and the impact on total returns is the ‘premium’ that you pay for the stability. 

What are the main ways to invest in gold? 

If you are looking to take a step towards diversification it is of course important to conduct independent research and seek financial advice if needed. The below 4 methods offer different benefits and drawbacks but are all ways that you can include more of this precious metal within your portfolio. 

Physical Gold: Buying gold in the form of coins, bars, or jewellery. You actually own the gold, but you need to store it safely.

Gold ETFs and Mutual Funds: This involves Investing in funds that are traded on the stock market and either hold gold directly or invest in gold mining companies. It’s easy to buy and sell these, just like stocks.

Gold Stocks: Buying shares in gold mining or trading companies. The value of these shares is linked to gold prices but also depends on the company’s performance.

Vaulted Gold: Owning gold that is stored in a secure vault. You don’t keep the gold yourself, but you own a part of it. You can buy or sell it online, and it’s safely stored for you.

Having a portion of gold could be a way to diversify your retirement savings, but it is important to do your own independent research to ensure you are properly formed and have an allocation that you will be comfortable with and one that will help you reach your financial goals. 

This content is for informational purposes only and should not be taken as financial advice. Always consult a professional before making any investment decisions. Remember that investing involves risks and is not suitable for everyone. Past performance is not indicative of future results.


Increased Investment Demand in Gold in 2020

Gold is a secure and safe-haven investment. It proves to be highly profitable as it is in demand today when the economy is highly volatile, and the threat of a pandemic is looming over nations. There is a global instability, and people are turning to gold, and investors are hoarding the metal.

The high demand for the asset is proving profitable for sellers, gold ETF companies, and miners and reassuring to investors who look to benefit in a possibly harmful economic future.

Investors see the fall of stocks, bonds, and other investments, while gold is maintaining an increased performance. In this case, there is an urgent need for financial security, and owning gold will provide substantial protection to companies and individuals.

There is also a movement in the bullion trade where numismatic gold and other metals are being traded. Individuals are collecting at a scale in the bullion market as they follow the expert advice that these assets are essential inflationary hedges.

Why does gold have a high investment demand today, and what are the trends that stimulate the movement of the precious metal’s high trading rate?

What Experts Say

Analysts see more optimism for gold and less for stocks and bonds as investment options in the current scenario. Gold could be the secure asset to put your money in, and you have to act quickly while the prices are at an ideal level.

Higher risk and uncertainty, together with lower opportunity cost, will plausibly be supportive of gold investment demand in 2020, according to the World Gold Council (WGC).

WGC says that the situation could offset the adverse results of lower consumer demand on gold performance while economic activity contracts. Gold’s behavior after that could depend on the rate of the recuperation and the duration of monetary policy and fiscal impetus.

Profitable Predictions

In an attempt to explain the state of gold, in May, Morgan Stanley placed the metal’s end-of-2020 base case at $1700 per ounce. Additionally, their analysts say that if a favorable series of circumstances align, the investment bank asserts that we could see gold prices increase as high as $1900 an ounce by the end of CY20.

For this buoyant price target to be hit, the analysts maintain that we would have to observe five factors to happen.

There must be a depressed US dollar, negative real rates, deterioration of equity markets, central bank buying, and the start of recuperation in fabrication demand.

The COVID-19 Factor

In the wake of COVID-19, central bank quantitative easing programs have sky-rocketed. The analysts forecast that the G4 Central banks’ balance sheets will increase by a cumulative $7.2 trillion.

In that respect, the investment bank additionally notes that as the scale of asset acquisitions in the US outpace that in other markets, USD debilitates, adding further upside propulsion to gold.

Although optimism has come back to some pockets of the global financial markets, particularly for equities, COVID-19 remains a threat. Fears of recession, and depression in some cases, remain. During a recession, even the most secure assets are sold off, as investors often try to de-disk at any cost.

Is it a good time to buy gold?

Experts say that while prices were less expensive for investors before 2020, investing in gold now is still more advantageous than in the coming years.

With the unpredictability of future economic scenarios, it is ideal to invest in an inflationary hedge. While other assets are failing for investors, gold is proving useful for-profit and safe. Experts even insist that individual investors must trade even on a small scale for self-preservation.

With lower global growth projection and volatility, the gold trend looks positive. This year, this valuable metal is trading on higher levels, and a host of circumstances will probably boost the rally in gold cost.

Currently, the world is seeing enormous demand destruction leading to an economic downswing, and the situation is benefiting the gold prices.

The Rising Demand

Bonds might no longer play a safe-haven role in balancing equity risk, and gold will fill the vacuum left by it. Factors including low-interest rates, low bond yields, risk aversion, fiscal and monetary stimuli, and inflationary pressure are resulting from a constrained supply chain point to a reality of a massive increase in gold prices.

In the instance of a downswing in emerging markets, economic models indicate that gold’s implicit returns in 2020 and 2021 will be higher than in most other scenarios. Its growth is seen to remain positive in 2022.

In this situation, gold’s strong return in 2020 is steered by the precariousness surrounding the COVID-19 outbreak and monetary policy action. On the other hand, negative economic growth bears a counterbalance by decreasing fabrication demand.

A Good Year For Gold

In a deep recession scenario, where the impact of the pandemic on the global economy is more significant and longer-lasting than initially predicted, gold’s excellent performance in 2020 will be followed by a rich but declining again until 2023. Afterward, the performance will turn negative in 2024, and it will result in an annualized inferred return of about 20% over a period of five years.

Investment demand has gone up substantially, and it proves rightful to be considered a safe-haven asset.

The Bank of America Securities (BofA Sec) suggests that gold prices in the worldwide market may rise to $3000 an ounce (Oz) by the end of 2021. Furthermore, the brokerage upped its target price from $2,000 to $3,000.

In the current scenario, experts say that stocks and bonds do not show much enticement as an investment option, and gold could be the asset to invest in.

Risk assets, including equity and debt, are declining all over the world because of uncertainty over their growth. Because of this situation, the investment demand for gold has gone up and it is a safe-haven asset.

Experts observe that macroeconomic perturbations due to the COVID-19 outbreak are leading investors to hoard gold.

The demand for gold in 2020 is high, and it is ideal to invest in the metal.