Asset Allocation For Gold and Stocks at Historic Lows

Pinnacle Digest writes:  In his latest article, backed with a plethora of fascinating statistics, Adrian Ash explains how ideal and unique gold is when it comes to diversification.


With asset allocation for equities in the US at 15 year lows and nearly 40 year lows in the UK, one would think some of that extra sideline capital should be invested in gold. However, that is not the case, at least not in the western world.


Portfolio allocation for gold, in the West, sits near 0.3%! Instead of gold, institutional money managers would rather put much of their capital in T Bonds and cash-like investments.  In fact, institutional investors now hold an average 27.4% of their money in US Treasury bonds.


Adrian Ash explains how this ‘near-cash’ investment strategy makes sense amidst a swelling Eurozone crisis, but what happens to those investments when the likely path of money printing is the only option left?


Adrian Ash states:

Put another way, this reckless caution has "two potentially detrimental repercussions," notes a new report from the World Gold Council, market-development organization for the gold industry – "the stagnation of capital due to lack of income and even negative yields [plus] the concern that monetary stimulus eventually leads to unavoidable and problematic inflation."


Ash explains how there is no asset that adds quite the diversification gold does, which has been outlined with new statistics.


The World Gold Council's new research explains that "Gold is a highly effective vehicle for diversification and risk management because of its independence from other asset classes."



Against all asset clases examined in the Callan Periodic Table over the last decade, second only to Emerging Markets, gold has performed the best.


One strong example for fund managers (particularly in the UK) to consider when looking at gold as an investment for diversification is that its price has moved, over the last 25 years, exactly opposite to that of the FTSE 100. So right when managers need it the most, when FTSE 100 shares collapse in value, gold comes through.


Click here to read the full report from Adrian Ash.