Fears of US inflation increases have prompted van Eyk to suggest investors revise their current portfolio asset allocations with a view to increasing their exposure to gold.
The research house’s recommendation is predominantly in the context of investors’ cash holdings within their asset allocations to alternatives, but van Eyk investment strategist Nigel Douglas said the strategy can also be applied to more traditional portfolios as well.
“The prospects for gold have improved given renewed US inflation concerns and demand/supply issues. While it has just reached US$542 per ounce, it still looks underpriced relative to some other major commodities, like oil, on a longer-term basis,” Douglas said.
He said investors should look to include more gold in their portfolios as it is an asset that helps reduce risk by neutralising inflationary increases and currency fluctuations.
Van Eyk’s latest proposal to boost gold exposures follows its initial recommendation in November 2003 for investors to introduce gold into their portfolios.
“It’s a position we’ve held since 2003, so it’s only really a more aggressive positioning prior to this last run up in gold,” Douglas said.
According to Douglas, the preference when looking to invest in gold has been in gold shares. Other means of investing in the commodity include physical gold and allocated or unallocated gold coins.
However, he warned investors to be mindful of existing holdings of gold in their domestic and global equities asset allocation.
“People can get exposure to gold through the Australian equities and international shares portions of their portfolios as well, so they need to make sure they are not double counting,” Douglas said.
