Gold in the investment portfolio

Nadeshda Demidova-Menzel and Thomas Heidorn

No 87, Frankfurt School - Working Paper Series from Frankfurt School of Finance and Management

Abstract: 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.

Keywords: Investing in gold; gold in the portfolio; correlation of gold; returns of gold; Xetra-Gold (search for similar items in EconPapers)
JEL-codes: G11 G15 G24 (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (69)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fsfmwp:87

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