The Case for Gold: Merk Investments

Merk Investments, LLC ® The Case for Gold: Portfolio Benefits of the Ultimate Currency Introduction “Historically, adding overall portfolio performance and a n our previous white paper on a gold allocation has key reason to consider the addition of a 1 gold, we discussed two key provided substantial gold allocation. Specifically, we find that reasons investors typically cite as enhancements to a incorporating a gold allocation into an critical decision-making factors portfolio’s risk-return investment portfolio produces optimal supporting an investment in gold: as a results based upon efficient frontier I profile.” form of protection against inflation and analysis. as a safe haven investment . We showed diversification benefit . Indeed, we show that current dynamics may support these that historically,

adding a gold allocation Superior Performance of Gold investment theses over the foreseeable provided substantial enhancements to a Over recent years, gold has future: portfolio’s risk-return profile. performed remarkably well relative • Expectations for future inflation have to other asset classes, in terms of become elevated, and may remain so, given This white paper focuses on the portfolio both absolute performance and a backdrop of easy monetary policies the applications of gold: we analyze the risk-adjusted performance. Over the world over. benefits of adding gold to an investment preceding 10 years, an investment in gold • Continued leverage throughout the portfolio. Our findings show that the would have significantly outperformed economy is contributing to uncertainty addition of gold into an investment a corresponding investment in the S&P over the future trajectory of the global portfolio may significantly improve 500 Index or U.S. bonds, not to mention economy and likely to result in ongoing the overall risk-adjusted performance. international and emerging market heightened levels of volatility. Notably, gold may help to minimize equities. Figure 1 illustrates that over the downside deviations in the value of an past 10 years, gold outperformed U.S. We believe these dynamics are likely to overall portfolio, reduce overall volatility, equities by over three times. support ongoing strength in the price and enhance returns. For example, in 2008, of gold over the foreseeable future when the U.S. stock market plummeted “Gold may help to 2 and consider these to be important 37.0%, gold actually appreciated in minimize downside 3 considerations in light of the current value during the year, returning 5.8%. deviations in the value global economy. We would also Additionally, we show that low levels of of an overall portfolio, propose that an equally important and correlation in movements in the price reduce overall volatility, complementary reason for an allocation of gold relative to other asset classes is a and enhance returns.” to gold is its potential portfolio primary factor in potentially enhancing 1 Please see Merk Investments’ White Paper: “Case for Gold: Invest in the Ultimate Currency?” 2 As measured by the S&P 500 Total Return Index 3 As measured by the spot price of gold per Troy ounce 1 November 2012 Merk Investments, LLC ® Figure 1: Growth of $1,000 for Various Asset Classes over 10-Year Period $7,000 $6,000 Gold $5,000 e u l a V t $4,000 n e m Emerging Market Equities...

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