Gold Bullion Securities and the World Gold Council have commissioned
a number of independent actuarial studies to investigate the
statistical and portfolio properties of holding gold bullion
in a typical diversified pension portfolio.
The reports found similar results being:
• The gold bullion price (in local currency) is not
related to the major domestic equity markets;
• A small amount of gold bullion in a portfolio can
decrease the volatility of returns; and
• A small amount of gold can decrease the probability
of a very negative return.
To download a full copy of each report, please click on the
relevant icon. Australia
(PwC)
United Kingdom (Mercer)
United States (Mercer)
PricewaterhouseCooper Report
(Australia)
Gold Bullion and Superannuation
Investment Policies
A review and analysis of the role that gold bullion could play
in the investment policy of Australian superannuation funds
This Report is an independent research Report that analyses
the possible impact of the addition of gold bullion as a separate
asset class within an investment portfolio. However this Report
makes no recommendations as to whether gold bullion should be
included within investment portfolios of Australian superannuation
funds.
The Report has two major sections. The first reviews the historical
evidence whilst the second uses a macro economic and investment
simulation model and a gold return simulation model which produces
a distribution of possible future outcomes.
As part of the historical review, it is concluded that:
Gold bullion has characteristics in terms of risk and
return that suggests it is very different from the traditional
asset classes
The correlation coefficients of the investment returns
for gold bullion with all other asset classes are slightly
negative or close to zero
The introduction of gold bullion would have had different
impacts for the 1992-97 and 1997-2002 periods. In the earlier
period it would have reduced the return by about 0.1-0.2%
pa for each 1% of gold bullion investment. However, for
1997-2002, the introduction of gold would have had virtually
no impact on the investment return
The introduction of gold bullion into the portfolio during
the last 5 or 10 years would have reduced the volatility
of the investment returns, as measured by the standard deviation
of monthly returns
Efficient investment portfolios, as measured by the efficient
frontier, would have included exposure to gold bullion for
the period 1997-2002. For the 10 year period to June 2002,
some gold allocation would have been efficient if a reduced
risk level was desired, together with the corresponding
lower return.
A PricewaterhouseCoopers macro economic and investment simulation
model, including a gold bullion module developed for this assignment,
has been used to simulate the distribution of projected investment
returns of Australian superannuation funds.
The simulations show that the introduction of gold bullion:
Reduces the spread of possible investment returns as the
probability of an extreme outcome is less likely
Reduces the median return by 0.3-0.4% pa in most cases,
where there is a 5% exposure to gold
Requires an expected return from gold bullion between
the expected return from cash and the expected return from
equities to cause a portfolio including 5% gold bullion
to have a preferred risk-return position when compared to
the performance from other typical investment portfolios.
Dr David Knox
November 2002
Mercer Investment Consulting (United Kingdom)
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mollis sed, dictum et, mattis euismod, lacus. Donec enim augue,
iaculis a, condimentum et, tristique ac, elit. Curabitur enim
pede, sagittis quis, vestibulum vel, mollis vitae, ante. Donec
lacinia, arcu sed ultricies semper, sem felis vulputate leo,
et sollicitudin metus lectus at odio. Pellentesque et justo
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Mercer Investment Consulting (United States)
Proin ipsum nibh, scelerisque sit amet, luctus non, congue
adipiscing, libero. Pellentesque risus dui, porta sed, elementum
vel, cursus ac, risus. Maecenas scelerisque, justo quis malesuada
tempor, wisi mauris rutrum pede, id malesuada sem libero id
sem. Sed placerat neque id ligula. Nunc id dui. Proin malesuada
pede tempus libero. Cras rutrum enim nec tellus. Sed nisl leo,
mollis sed, dictum et, mattis euismod, lacus. Donec enim augue,
iaculis a, condimentum et, tristique ac, elit. Curabitur enim
pede, sagittis quis, vestibulum vel, mollis vitae, ante. Donec
lacinia, arcu sed ultricies semper, sem felis vulputate leo,
et sollicitudin metus lectus at odio. Pellentesque et justo
nec turpis luctus gravida. Proin fringilla elementum velit.
Fusce hendrerit.
