The recent geopolitical events only highlight again the merits of gold as a risk diversifying asset in a portfolio.
The world was seemingly poised on the precipice of potentially one of the most worrying geopolitical events possibly since the Vietnam Never since has a superpower found itself up against what is a maverick and potentially dangerous opponent. The prospect of the highly volatile and paranoid leadership of North Korea having an effective nuclear weapon
Even if the sides may have stepped back from the brink it is quite frankly a matter of time before North Korea will have to be brought into line by the international community. It would be in no superpowers interest to see North Korea with an effective nuclear armament that could threaten countries thousands of miles from its borders.
A more milder version of geopolitical thanks this playing out in places such as France and Turkey. France faces the possibility of a second round presidential run off between the left and right wing extreme candidates. In Turkey the population appear to have voted by to give Tayyip Erdogan even greater powers through a move Presidential authoritarian political system.
The world is in a state of flux and few assets classes will protect an investor’s wealth as gold will.
Recent data from the World Gold council shows that investment demand for gold last year rose by 30%. In the initial phase of this year gold demand dropped. Investors believed that Donald Trump was about to embark on series of actions to encourage growth. Gold prices are on an upward march again prompted by geopolitical problems and signs that the US economy is struggling. President Trump’s ambitions for change have come to nought. No healthcare reform, no tax cuts, no spending increases. Meanwhile the US economy is showing signs of weakness. Recent data showed a significant fall in retail sales, falling auto sales and a drop in core inflation. Gold is back.
A sensible asset allocation to gold is around five to seven percent of net wealth. In today’s world investor’s should ensure they have at least thus amount in their wealth planning.