Why an allocation to gold may be worth considering right now

Many investors consider gold a safe haven and include it in their portfolio as a way to potentially offset losses from another asset class. Some investors are hesitant to include gold in their portfolios because of its volatility.

While gold is speculative and, in most cases, should not be bought as a single investment, here are some reasons it may be worth considering right now as part of a diversified portfolio.

1. The modern era of gold:

Gold has outperformed equities and bonds since the dawn of radical monetary practices by world central banks.

Source: Bloomberg. Period 12/31/1999-5/31/2023

2. Central Banks have been net buyers of gold since 2009:

This momentum has accelerated significantly again in the past year. In 2022, central banks increased their purchases by 152%, to over 1,136 tons. It is expected that central bank demand could become a key driver of the gold bull market.

Global Central Bank Gold Purchases, in Tonnes (1950-2022)

Source: World Gold Council, Incrementum AG.

3. Gold is finite:

Lack of discoveries and declining production will drive gold prices higher.

Major Gold Discoveries by Year (1990-2021)

Source: S&P Global Market Intelligence. Data as of Apr. 12, 2022. 2023 S&P Global.

"Gold has outperformed the S&P 500 in 6 out of the past 7 periods of economic uncertainty"

4. Gold provides proven portfolio protection:

Gold has returned an average of +11.65% compared to -12.56% for the S&P 500 during
these periods.

Performance % of S&P 500 Index vs Spot Gold During Periods of Uncertainty (1950-2022)

Source: Sprott Asset Management, Bloomberg. Data as of 6/30/2023. The beginning and ending periods selected are our best estimate of the highest impact periods of each crisis and does not necessarily indicate the exact beginning or ending of the specific crisis event. This information is presented for illustrative purposes only. Dates used: Global Financial Crisis: 10/11/2007-3/6/2009; Eurozone Crisis: 4/20/2010-7/1/2010; U.S. Sovereign Debt Downgrade: 7/25/2011-8/9/2011; China Yuan Devaluation: 8/18/2015-2/11/2016; Fed Rate Hike & China Trade War: 9/20/2018-12/24/2018; COVID-19 Pandemic: 12/31/2019-12/31/2020; Russia-Ukraine War & Banking Crisis: 2/24/2022-6/30/2023. S&P 500 TR Index is measured by the SPXTR; U.S. Treasuries are measured by Bloomberg Barclays US Treasury Total Return Unhedged USD (LUATTRUU); and Gold Bullion is measured by spot gold (Bloomberg GOLDS Comdty).

5. Gold can help offset risk and improve returns:

An allocation to gold may improve the risk/return profile of a portfolio.

Growth of $10,000

For illustrative purposes only.
* Portfolios are rebalanced annually. Gold represented by Gold Commodity price, Canadian Bonds (FTSE TMX Canada Bond Index), U.S. Equities (S&P 500), Canadian Equities (S&P/TSX Composite Index).
Source: Bloomberg, FPSC.