Gold in investment portfolios

As a tangible investment gold is sometimes held as part of a portfolio because over the long term gold has an extensive history of maintaining its value. It has in the last century gained ground in relation to fiat currencies owing to inflation. Gold becomes particularly desirable in times of extremely weak confidence and during hyperinflation because gold maintains its value even as fiat money becomes worthless. People who enjoy investing in gold are known as goldbugs.

Futures contracts based on gold currently trade on various exchanges around the world. In the US this occurs primarily on COMEX (Commodity Exchange) which is a subsidiary of the New York Mercantile Exchange. Speculation about the future price of gold and other commodities is carried on at COMEX. Recently, gold-based ETFs like GLD have emerged as a more convenient investment vehicle.

In some countries such as Switzerland, it is possible to hold physical gold as part of an investment portfolio, due to the absence of taxes and narrow bid-ask spreads, however in other countries portfolio managers sometimes hold gold shares or gold bullion securities as a proxy for the metal itself. Exchange Traded Funds such as Gold Bullion Securities are securities sponsored by the World Gold Council and which are fully backed up by allocated gold held by a custodian. The main Gold Bullion Securities are as follows:

• New York Stock Exchange (NYSE), Symbol:GLD (Streettracks Gold Shares, ISIN No. US8633071043)

• London Stock Exchange (LSE) Symbol GBS (Gold Bullion Securities ISIN No. GB00B00FHZ82)

• Euronext France Symbol:GBS (Gold Bullion Securities ISIN No. GB00B00FHZ82 )

• Australian Stock Exchange (ASX), Symbol:GOLD (Gold Bullion Securities ISIN No. AU00000GOLD7)

• Johannesburg Securities Exchange (JSE), Symbol:GLD (New Gold Debentures ISIN No. ZAE000060067 )