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Gold in the investment portfolio

  • Demidova-Menzel, Nadeshda
  • Heidorn, Thomas

The paper examines the key drivers of gold investment. Since 2000 the gold price has risen drastically, making gold an interesting add-on to a portfolio. As gold futures have negative roll returns, gold pool accounts are characterized by high credit risk and physical possession of gold means high transaction costs, Xetra-Gold might be the most efficient way to enter the market. Xetra-Gold is a product created by the Deutsche Börse in 2007, which is handled like a security but can be exchanged into physical gold any time. In the portfolio context gold has had a positive impact on Euro and USD portfolios between 2000 and 2006 due to considerable returns and low correlation to other assets. However, this has not been true for almost all other periods, the correlation was always low but the returns of gold were almost zero, overriding the positive diversification effect.

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File URL: http://econstor.eu/bitstream/10419/27853/1/577675362.PDF
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Paper provided by Frankfurt School of Finance and Management in its series Frankfurt School - Working Paper Series with number 87.

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Date of creation: 2007
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Handle: RePEc:zbw:fsfmwp:87
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  1. Ansgar Belke & Thorsten Polleit, 2006. "How the ECB and the US Fed Set Interest Rates," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 269/2006, Department of Economics, University of Hohenheim, Germany.
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