~ (@Michael-official) on getquin

+++ How much gold makes sense in a portfolio? +++

Hello everyone,

At the beginning of 2024, I started to include gold in my portfolio and opted for EUWAX Gold II
$EWG2 (+2.69%) in the process.

The diversification was particularly important to me in order to make myself less dependent on fluctuations in the stock market and global political events and to ensure long-term value retention.

For me, this is a sensible building block in any portfolio.

For me, diversification now also includes cryptocurrencies such as Bitcoin
$BTC (+4.32%) and Ethereum
$ETH (+9.04%)which have also made a significant contribution to increasing my portfolio.

Since the beginning of the year gold an impressive increase in value of almost 30 % achieved.

For me, gold and cryptocurrencies remain a long-term investment.

Current gold-all-time highs:

-In Euro: € 2,567.11

-in US dollars: $2,787.54

(Reached on 30.10.2024 -closing prices)

Diversification ⚙️

This always raises the question for me:

How much gold in a portfolio actually makes sense?

There are different strategies for this, which depend heavily on the individual investment strategy, risk appetite and market conditions.

Many experts, investment banks and investment advisors recommend a gold share of around 5-10 % of the portfolio.

Strategies for the ideal gold weighting in the portfolio

1. classic diversification (5-10%)

One allocation of 5-10 % in gold is considered a proven approach to diversify a portfolio.

(Allocation refers to the strategic distribution of assets across asset classes).

-Protection against systematic risks:

Gold often moves in the opposite direction to equities and bonds. In times of crisis, gold remains stable or increases in value.

-Limited opportunity costs:

A moderate proportion of gold hardly affects the growth potential of the portfolio, as the majority is invested in higher-yielding asset classes such as equities or bonds.

-Global hedging:

Gold not only protects against local market risks, but also against global uncertainties such as geopolitical tensions or economic crises.

Example of a balanced portfolio:

-55 % equities and ETFs

-30% bonds

-10% gold

-5% cryptocurrencies

2. defensive strategy (10-20 %)

A gold share of 10-20 % is particularly suitable for conservative investors or in times of heightened uncertainty.

-Focus on value preservation:

Gold offers stability in turbulent market phases or when risk appetite is low.

-Hedging against specific risks: A higher proportion of gold makes sense, particularly in the event of high inflation, currency devaluations or geopolitical conflicts.

Example of a defensive portfolio:

-40 % bonds

-30% equities and ETFs

-20% gold

-10% other real assets (e.g. real estate funds)

3. tactical allocation

A flexible, tactical allocation can make sense for experienced investors.

-Anti-cyclical investing:

Gold holdings are increased when risks (e.g. fears of recession) increase and reduced when markets are stable.

-Taking advantage of market cycles:

Active management makes it possible to benefit from fluctuations in the gold price.

Example:

-Stable times: 5 % gold

-In times of crisis: up to 15 % gold

Important: This strategy requires in-depth market knowledge and continuous monitoring of the economic situation and a quicker response.

Forms of gold investment

-#1 Physical gold (coins, bars): Direct control and safekeeping, but involves storage costs e.g. for a safe deposit box.

-#2 ETFs/ETCs: Easy trading and low costs.

My favorite: EUWAX Gold II
$EWG2 (+2.69%)

EUWAX Gold II is an exchange-traded commodity (ETC) from the Stuttgart Stock Exchange that securitizes the ownership of one gram of gold from a 100-gram gold bar.

On request, the physical gold can even be delivered to the exact gram.

A particular advantage of this product is the free delivery from a quantity of 100 grams within Germany.

EUWAX Gold II also impresses with its tax structure:

As it is treated like physical gold, capital gains are tax-free after a holding period of more than one year.

In addition, there is generally no tax deduction when selling via banks or online brokers.

🔖 Savings plan options with:

- Scalable Capital

- Comdirect

- Consorsbank

- DKB Bank

3.Gold mining shares: Higher risk, but potentially higher returns.

My favorite in the gold mining sector:
Newmont $NEM (+0.6%)
🔑

Newmont is the only gold company in the S&P 500 and scores with strategic acquisitions and low production costs (all-in sustaining costs) of currently 1.620 USD per ounce.

I hope you enjoyed this insight! I'll keep working on exciting articles for you.

How do you weight gold in your portfolio? 💬

Best regards

Michael

All-in-or-nothing@All-in-or-nothing

Thanks for the article, even if it's nothing new to me😉 I weight (or rather want to weight😅) gold at 20% in my portfolio. However, this is mainly due to the fact that my target allocation for BTC is also 20% liegt👍🏻. In addition, there is my core ETF with 60% of the portfolio. That's it🤷🏼‍♂️.

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Show answer

Robinhodl@Robinhodl

Very good article! Perhaps a small addition: if the market falls quickly in the short term, for example due to a Black Swan event, gold usually also falls in the short term before rising again relatively quickly because the market is looking for liquidity.

I am now also at around 17-18% weighting after the small correction, but mainly because of the price rise, and still feel "relatively" comfortable with this. However, I would definitely not go above 20%, even if I consider the BRICS+ risk and dedollarization. Due to Trump, I now see the risk more in the short to medium term and no longer in the long term. What worries me, however, is the spread between the producer and consumer side. Of course, this can last for a long time, but what I don't understand is why even the unhedged miners have not yet been able to benefit from the prices.

What is the market pricing in here? It can hardly be inflationary pressure due to the sanctions, nor a falling oil price due to Trump. The market is probably assuming that the gold price will come down substantially, which I personally don't see due to Brics+ - I rather expect a consolidation, as in my opinion the upside should have a hard time at the price level if we can maintain inflation.

Another thing that always fascinates me about gold is that at the macro chart level it follows the chart technique almost like a textbook. I mean the cup-and-leg formation and also the rise, then the bullish consolidation and then exactly the same price rise again.

Rmann@Epi

A good first insight into the topic! Gold is quite complex and not easy to grasp. There are many misconceptions and prejudices about gold. You can't address them all in a short article on weighting.

Personally, however, I am missing essential information: How do the experts come up with these weightings of gold? What sense do they make of it? What historical consequences did the proposed allocations have on performance? What are the arguments against 100% B&H gold? What about 50% gold?

By the way, you didn't even mention my personal allocation to gold as a possibility. It is in fact beyond 30%, both in the strategic B&H portion and in the tactical portion. Nor did you even mention the strategy of holding gold in the major historical 8-year cycles, which could be described as semi-B&H - although this could be the only sensible strategy.

To bring up gold after an almost 30% rise YTD is of course obvious, but also a bit late. The probability is quite high that gold will be more of a performance cucumber over the next few months.