Going for Gold

CPD Content

31 March 2026

Global interest in gold has surged, with record prices and strong investor demand highlighting its evolving role in portfolio construction. According to insights from Jason Petras (Resonant Asset Management), Clive Maguchu (State Street Investment Management) and Marissa Salim (World Gold Council), gold is increasingly being used to enhance diversification and improve portfolio risk-return outcomes.

Gold’s recent rally has been driven by a combination of geopolitical uncertainty, a weakening U.S. dollar, and rising demand from central banks. Prices climbed from around US$2,800 per ounce in early 2025 to over US$4,300 later in the year and now $4,500, reflecting its status as a safe-haven asset. At a global market value of approximately US$23 trillion, gold remains a significant and highly liquid asset class, with demand increasingly concentrated in Asia-Pacific markets, particularly China and India.

A defining characteristic of gold is its dual role as both a consumer good and an investment asset. This contributes to its unique behaviour in portfolios, particularly its tendency to act as a diversifier. Gold has historically shown low or negative correlation with equities during periods of market stress, making it an effective hedge against volatility and drawdowns.

From an asset allocation perspective, gold has traditionally been used tactically, particularly during times of disruption. However, there is a growing view that it can play a more strategic role within multi-asset portfolios. While modelling gold’s forward returns remains challenging, analysis suggests that even a modest allocation can materially improve portfolio outcomes. In practice, an allocation of around 2–5 per cent is often considered appropriate for retail investors, balancing diversification benefits without overexposure.

Access to gold has also evolved significantly. Investors are no longer limited to physical holdings such as bullion or coins, with exchange-traded funds and managed funds now providing efficient, liquid, and transparent exposure. These structures allow investors to incorporate gold seamlessly into portfolios while avoiding the logistical challenges of physical ownership.

For portfolio managers, implementation can vary. Some strategies focus on direct exposure through ETFs or funds, while others incorporate gold indirectly via equities, such as mining companies. This approach can introduce an income component through dividends, addressing one of gold’s traditional limitations as a non-yielding asset. Improving fundamentals for gold producers, supported by strong underlying demand, further enhance the attractiveness of this segment.

A key debate among investors is whether gold should be classified as a defensive or growth asset. While it exhibits characteristics of both, its ability to preserve capital and reduce volatility during market downturns supports its role as a defensive allocation. In diversified portfolios, gold can act as a hedge against equity risk and provide liquidity during periods of stress, enabling investors to rebalance more effectively.

Looking ahead, the outlook for gold remains uncertain but broadly supportive. Ongoing geopolitical tensions, central bank buying, and structural shifts in global capital flows are expected to underpin demand. While short-term corrections are possible, gold’s long-term role as a portfolio stabiliser remains intact.

For investors who have yet to allocate to gold, the current environment still presents an opportunity. Beyond price appreciation, its value lies in diversification, downside protection, and its ability to enhance overall portfolio resilience. In an increasingly complex macro environment, gold continues to demonstrate its relevance as a strategic component of modern portfolio construction.

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