Have you ever considered holding gold as part of your business’s portfolio? It’s not that surprising if you haven’t, but it’s also not surprising that an increasing number of businesses are doing just this.
Dave Russell, CEO, GoldCore Ltd
Businesses taking the decision to make a strategic allocation to gold is a trend that has rapidly picked up pace in recent years. This is because the state of the world and growing uncertainty has a number of managers wondering how they can best mitigate the risks usually associated with traditional assets.
Here in Ireland, the desire for certainty amongst an increasingly unstable backdrop is especially pertinent. The potential uncertainty following the next election may be underestimated. Months of negotiations may be required to form a coalition capable of securing the 88 votes needed for a majority in the upcoming Dáil. This could create an unstable environment for companies considering medium-term investments.
This is particularly challenging for SMEs experiencing various pressures. For instance, those in the hospitality sector have made their frustrations clear by protesting in Dublin, calling for government support amidst ongoing closures. Their successes and struggles have historically served as a reliable indicator of the broader economy.
At the time of writing, gold is up over 36% in euro terms in the last year. Those unfamiliar with the dynamics of the gold market may wonder if a correction is coming and so wait to buy gold. However, the factors that have driven it to new highs show little sign of dissipating. More importantly, those factors are the very same ones that are giving businesses cause for concern – underlying inflation, supply chain disruptions, central bank policies, and ongoing currency depreciation.
Throughout history, gold has proven to be an effective means of preserving an investor’s purchasing power. This applies to both individuals and investors alike. When other asset classes, such as stocks and real estate, decline, gold prices often rise, providing a buffer against market volatility and uncertainty. Furthermore, gold tends to be largely uncorrelated with other investments, making it a valuable diversifier in an investment portfolio.
However, regardless of how appealing an asset may seem, it’s crucial to remain balanced in your allocation strategy. This principle applies to gold as well. A recommended allocation is around 10%, which provides sufficient exposure to mitigate losses during financial downturns without overwhelming other investments or complicating management. This percentage can be tailored to fit individual risk tolerance and investment goals.
With uncertainty looming, both at home and abroad, it can seem intimidating to know where to turn when allocating assets, especially for a business. However, gold has long been the financial insurance of choice for business owners, and today this is more relevant than ever.
See www.goldcore.ie for more.
