The recent rise in the price of gold has once again attracted our clients’ attention. What proportion of your assets should you invest in gold? In an article published on 24 October 2019 in the Belgian daily, L'Echo, David Schmidt, Managing Director of Banque de Luxembourg, Belgian branch, offers some insights.
The recent rise in the price of gold has sharpened the appetite of private banking clients who have been burnt by the volatility of the equity markets and prompted them to start thinking about investing in gold. Even though its status of safe haven is its main attraction, should the volatility of its price mean that we should limit our exposure to it?
The price of gold was very stable in the first few months of the year, but then shot up in the face of so many uncertainties: an increase in geopolitical tensions, the twists and turns of the Brexit saga, ups and downs in the trade negotiations, the slowdown in growth etc. In this context, investing in gold has taken centre stage again.
David Schmidt, Managing Director of Banque de Luxembourg, Belgian branch, has certainly seen renewed interest in gold by wealthy private investors. “More and more clients have been showing an interest in gold in the last few years, mainly because of the central banks’ policies and its recent surge in price.”
He adds that as the gold price has soared, “Some clients have been tempted to over-expose themselves to gold, completely disregarding its relatively speculative nature. Although gold fully deserves a place in a well-diversified portfolio, it is vital to ensure that it is not overweighted. We are structurally exposed to this asset class as we consider it to be a form of insurance against currency depreciation and systemic risk.”
What's the best way of investing in gold?
“The best way, for reasons of liquidity and considerably less capital outlay, is to invest in an ETF backed by physical gold,” says David Schmidt.
Article published on 24 October 2019 by Philippe Galloy in L'Echo.