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Diversification

The World Gold Council has recently posted its analysis of the continued relevance of gold.

As one might expect from the source, the WGC finds that gold is a strategic asset that can play several valuable roles in a portfolio.

Toward this end, the paper offers a chart of gold’s returns over three distinct time horizons: 10 year, 20 year, and since 1971. The last of those periods, then (I’ll spare you the arithmetic) is 47 years. It is significant because 1971 is the year that President Richard Nixon pulled the United States out of the Bretton Woods system created by the victors in World War II. Since 1971, the dollar has been free to float as against the value of gold and by virtue of logical equivalence the value of gold has been free to float against the U.S. dollar. So this is the longest continuous time horizon available.

The recent decline in the crypto market and then the stock market did not immediately lead to a strong increase in the price of gold. But as is often the case, these movements can only take shape at a later stage. Gold in dollars per ounce has had to return something after the January peak of $ 1358. At the moment gold is in dollars per ounce at $ 1320. In euro per kilo the graph shows a similarity. Gold plummeted after the peak in January at € 35,430. The last weeks between € 34,700 and € 34,200. We therefore continue to insist on the main function of gold as diversification.