Gold is rising because it is a Strategic Monetary Asset and in high demand to protect buying power of investors, institutions and sovereigns from a global trend of currency devaluation.
Gold has a low correlation to equities (as shown by comparison to S&P in chart below). Gold diversifies your portfolio and may help dampen the volatility of your overall portfolio.
- Stabilization of markets caused by failing institutions and western nation debt has required unprecedented Quantitative Easing by Central Banks globally. This has led to continued currency devaluation and an increase in gold prices in all currencies.
- Volatility in the global financial system has prompted Central Banks to reverse a two decade policy of reducing the size of foreign reserves held in gold. Central Banks have now switched from a two decade trend in selling gold as foreign reserves and become net buyers.
- Gold is more commonly viewed as a “Strategic Monetary Asset” as well as a legitimate foreign exchange portfolio asset by Central Banks, and the one safe haven against Quantitative Easing by the global financial markets.
- Gold has been one of the best performing assets of the last decade with strong gains against all other currencies: