WGC Depicts Gold as the Most Effective Commodity Investment

SEATTLE (Scrap Monster): The investment in commodities tend to return immense benefits for investors over a period. Mostly, investment in this asset class is made through commodity indices, which invariably include gold. According to World Gold Council (WGC), the weightage of gold within the commodity indices is considerably small when matched with its importance as a strategic portfolio asset.

Gold needs to be seen as a multi-faceted asset, that stands apart from the commodities complex. It has proved to be a more effective diversifier than other commodities. In fact, gold has delivered better long-term returns than other commodities. In addition, gold has high liquidity and comparatively lower volatility. WGC notes that strategic gold allocation offers much more widespread benefits that broad-based commodity investment.

Investors who allocate their money to broad-based commodity indices often presume that they have appropriate allocation to gold. However, many of these indices have considerably smaller allocation to gold. For instance, indices including the S&P Goldman Sachs Commodity Index and the Bloomberg Commodity Index allocates only between 3% and 12% of their total portfolio for gold. Such low weightage hinders sufficient exposure to gold, says WGC.

Commodities generally account for less than 10% of the total investment portfolio. Gold usually accounts for less than 10% of that amount. This essentially means that overall exposure to gold as a commodity is less than 1%. WGC recommends raising strategic allocation in gold to anywhere between 2% and 10% of the total investment portfolio.