Gold as a Portfolio Diversifier: The World Gold Council and Investing in Gold

14 Pages Posted: 30 May 2017

See all articles by Pedro Matos

Pedro Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Richard B. Evans

University of Virginia - Darden School of Business

Abstract

This case is taught in Darden's Investments elective but could be used in introductory Finance classes to explore the concept of diversification of investments or in a portfolio management course as a means to explore optimal portfolio allocation. It is accompanied by several teaching tools including a teaching note for instructors, student and instructor spreadsheets, student and instructor videos, and a PowerPoint deck for class debrief. The case would work well in a module sequenced between CornerStone Partners (UVA-F-1677) used before and Pravda Asset Management (UVA-F-1602) used after. The global head of investment research at the World Gold Council (WGC) has finished his presentation “The Strategic Case for Gold as an Asset Class” at the 2012 Bloomberg Precious Metals Conference in New York. As a result of the market collapse in 2008 and the ongoing euro-area crisis, investors worldwide have safety and security on their minds, and many in the room were wondering whether gold would provide capital preservation and improve the overall risk-return tradeoff of their portfolios. At the same time, the sustained run-up in the price of gold since 2001 that was mentioned in the presentation was a cause for concern. Was gold the safe haven that it had proved to be in 2008 and 2009, or was it an asset class at the peak of a bubble? The investment case for gold deserved closer examination.

Excerpt

UVA-F-1675

Rev. Sept. 26, 2012

GOLD AS A PORTFOLIO DIVERSIFIER:

THE WORLD GOLD COUNCIL AND INVESTING IN GOLD

There was an audible buzz in the room as Juan Carlos Artigas, global head of investment research at the World Gold Council (WGC), finished speaking. “The Strategic Case for Gold as an Asset Class,” his presentation at the 2012 Bloomberg Precious Metals Conference in New York, had attracted quite an audience. As a result of the market collapse in 2008 and the ongoing euro-area crisis, investors worldwide had safety and security on their minds, and many in the room were wondering whether gold would provide capital preservation and improve the overall risk-return tradeoff of their portfolios. At the same time, the sustained run-up in the price of gold since 2001 that Artigas had talked about in his presentation was a cause for concern. Was gold the safe haven that it had proved to be in 2008 and 2009, or was it an asset class at the peak of a bubble? The investment case for gold deserved closer examination.

The World Gold Council

. . .

Keywords: investment research, investor portfolios, gold allocation, core assets, institutional investors, risk-return tradeoff

Suggested Citation

Matos, Pedro and Evans, Richard B., Gold as a Portfolio Diversifier: The World Gold Council and Investing in Gold. Darden Case No. UVA-F-1675. Available at SSRN: https://ssrn.com/abstract=2974493

Pedro Matos (Contact Author)

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434 243 8998 (Phone)
434 924 0726 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty-research/directory/pedro-matos/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Richard B. Evans

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4030 (Phone)
434-243-7680 (Fax)

HOME PAGE: http://faculty.darden.virginia.edu/evansr/

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