Gold in A Portfolio: Why, When, and Where?

Abstract

In this article, we assess the safe-haven, hedging, and diversifying properties of gold for investors located in various countries and under various economic scenarios. Specifically, we focus on G7 countries plus China and India over the 20-year period ranging from 2000 to 2020. Our empirical results show that gold is a safe haven in five out of nine countries, namely Canada, Germany, Italy, the UK, and the US. We also show that the benefits of gold depend on the existing market environment as proxied by market volatility and interest rates dynamics. Overall, our results show that gold is relevant for strategic asset allocation as it may offer investors in some countries protection against significant equity market corrections. Our empirical analyses are also relevant for tactical asset allocation as we show that the safe-haven properties of gold are time-varying and may depend upon volatility state and interest rates dynamics.