Sergio Lujan, CIM, Senior Investment Consultant, Sprott Asset Management, joined Keith Black, Managing Director of RIA Channel, to discuss the gold market.
Sprott is a publicly traded company with four decades of investment solutions in precious metals. The firm, which manages $25 billion in AUM, recently added investment strategies in energy transition materials, such as uranium and lithium.
Gold has had a strong performance in recent years, outperforming both stocks and bonds since the Fed started tightening in 2022. Gold is now trading around $2,000 per ounce, up over 5% in 2023, making new highs in many global currencies. Gold has the potential to make new highs in USD terms.
There are a number of ways to consider the role of gold in a portfolio. As the correlation between stocks and bonds has risen, gold has been a strong diversifier relative to the 60/40 portfolio. An allocation of 5% to 10% in physical gold has historically improved risk-adjusted returns and can add value as a hedge against inflation and a store of value during risk-off markets. In risk-on market environments, investors can consider an opportunistic trade by investing in the stocks of gold miners, which can be leveraged two to three times the price of gold. In addition, gold mining stocks are at historic lows relative to the stock market as well as to gold prices.
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