Is gold a strategic asset ?

The stock exchange allows you to trade stocks, securities and bonds throughout the world. Investors buy an asset (part of a company or a debt), and receive dividends (or interest) in return. The stock market is complex, and some purchases may be riskier than others. The greater the volatility of the stock, the greater the risk of a significant gain. However, where the possibility of obtaining substantial dividends is present, so is the risk. If an index increases by 50%, it can fall by 50% the next day. A strategic asset is therefore an asset that allows risks to be reduced, in a dynamic of portfolio diversification. This increases profitability while preserving capital during phases of financial crises.

Gold holds a special place in these trades. Indeed, gold is a liquid asset, not backed by the stock market. Since the end of the gold standard, physical gold no longer guarantees fiat currency. In other words, gold is completely independent of inflation and various crises. Furthermore, the price of gold is quoted twice a day in London, by the London Bullion Market Association. The LBMA sets the price based on supply and demand. Gold is experiencing a sharp increase in demand (around 15% per year since 2001), due to several factors:

• Gold is independent;
• Purchasing gold
• can be done in physics or paper;
• Gold protects against stock market fluctuations;
• The gold metal is considered a safe haven;
• It is a source of yield;
• Gold is liquid;
• It’s a way to diversify your savings.

The  2023 financial crisis  affected the global economy. Some American banks went bankrupt, and Credit Suisse was bought by UBS. As for French banking establishments, the shares of Société Générale, BNP Paribas and Crédit Agricole experienced significant declines. In this context,  investing in gold  represents a way of maintaining control over your assets, and therefore limiting losses. The gold metal therefore becomes a strategic, diversification and capitalization asset.

Here is the financial crisis definition: it is the consequence of an increase in monetary, stock market and economic risks which lead to a generalized loss of confidence. Investors shift investments, causing stock prices to plunge. At the same time, the value of the currency decreases, and central banks put in place rescue measures.

Is gold a profitable asset ?

The year 1971 marked the end of the gold standard. From this date, gold is no longer considered as a means of guaranteeing currency, but as an asset in its own right capable of

preserve purchasing power. Since then, gold has seen its value increase by around 10% per year. It went from $35 an ounce to over $1,800 these days. This spectacular increase is due to several elements:

• Liquidity;
• Rarity.

Indeed, gold is a rare product. Gold mines have barely increased production (an increase of around 1.6%), while demand has exploded. The precious metal is used in industry (health, technology, etc.), in jewelry, and in the investment sector. This last point is crucial, because it is mainly investment that causes the price of gold to jump. Central banks and states (China, Russia, India) buy gold en masse, in order to create a sufficient reserve in the event of a crisis. On the other hand, gold protects against inflation. When it is less than 3%, gold is then around 5% profitability. This difference becomes more pronounced when inflation exceeds 3%. In this case, gold can achieve up to 15% return. In other words, when the international economy is doing poorly, gold holds up. Finally, the main quality of gold is its ease of exchange. If you opt for physical investment, you can sell your bars and your  gold coins  quickly, to recover your stake. If you buy at the lowest, then you can get a capital gain.

You have a stock portfolio and you want to diversify it ? You want to know how to invest in the stock market while limiting the risk of capital loss ? Here are some tips to boost the return on your portfolio thanks to gold. 

Analyze the market

The return of a portfolio is conditional on the performance of stocks, the economic and geopolitical situation and the good financial health of companies. This is why he

It is essential to analyze stock market and commodity market data, to monitor the volatility of indices and gold (physical or paper).

Find out about the performance of gold

Analysis of the gold price shows that the gold-bearing metal peaked during the Covid-19 crisis. Since then, gold has maintained a high level and benefited from good liquidity. Indeed,

each day, nearly 80 billion dollars are exchanged every day (cash and over-the-counter contracts). Futures contracts represent more than $35 billion in trades. As for ETFs, the share is $1 billion per day.

You can also pay attention to the annual reports of the World Gold Council, which closely follows the evolution of gold on the markets.   

Diversify your portfolio with gold

Diversification is the key to performance. There are several ways to do this:

• Acquire more or less risky assets;
• Investing in real estate (via SCPIs and other management funds thanks to PEA and life insurance);
• Buy gold. 

The indicators and graphs which monitor the profitability rates of the portfolios show that the gold asset holds an important place in the performance. Investing 5% in gold reduces the risks of a bond portfolio (from 3.20% to around 3%), and increases profitability by 0.3%. If you own a stock portfolio, the margins are much greater. purchasing gold and silver  is therefore a good way to diversify your portfolio, fight against inflation while increasing profitability.

At Gold Union, you have access to a wide choice of gold or silver investment products. Ingots, ingots or coins, our advisors offer you tailor-made and personalized solutions, which are adapted to your needs