The role of gold in a portfolio

GOLD has gained 66 per cent in the last two years and just hit a new all-time high of US$2,075 last week, before pulling back sharply by over US$200 in four days.

While commentators are referring this as a new bull market, gold hit its previous all-time high of US$1,921 all the way back in 2011, proceeding to lose 45 per cent of its value over the next five years, and giving investors near-zero returns over the last nine years. This kind of volatility is normal with commodities, which is why most investors ignore the sector, and for the ones that allocate in it, it is normally a very small percentage of investors' portfolios compared to bonds and equities.

The rise in gold, driven by the most recent global experiment in central bank helicopter money to partially alleviate the impact of the Covid-19 lockdowns, has rekindled investor interest in the metal as an investment.