Three-quarters of pension funds want to buy more gold

Three-quarters of pension funds in Europe are considering adding gold to their investment portfolio in the next twelve months. This is evident from a research of the Global Palladium Fund (GPF) among 150 different European pension funds with total assets under management of $213 billion. The main reason for funds to buy gold is not the rise in the price of gold, but the added value of the precious metal as a diversification and safe haven.

Three-quarters of all pension funds that want to buy more gold give the reason that it has become easier to invest in the precious metal. This is partly due to a larger supply of Exchange Traded Funds (ETFs) with physical gold backing. Many pension funds see the precious metal as an attractive instrument for diversification in the investment portfolio. For example, 71% indicated that the precious metal offers protection against a depreciation of the dollar. Also, 67% of funds that consider gold say the precious metal offers protection against inflation.

Gold as a safe haven

Only 13% of funds say they want to buy bullion because of the rise in Gold price. This suggests that pension funds are increasingly looking more fundamentally at gold. They are considering the precious metal not because its price is rising, but because it is a tool to protect wealth. For example, against currency depreciation and negative interest rates.

As the Global Palladium Fund itself points out, pension funds and investment funds have fewer and fewer options to protect and preserve assets due to the accommodative monetary policy of central banks and the enormous deficits and sovereign debts of governments. For example, government bonds are increasingly yielding negative returns. Then gold is a Attractive alternative.

Gold vs Government Bonds

Historically, government bonds have played the role of a safe haven, but in recent years the investment landscape has fundamentally changed. After all, a traditional portfolio with only stocks and bonds offers Not enough protection more against falling prices. In the past, investors were able to absorb the risk of falling prices with government bonds, but these no longer provide returns. This is despite the fact that gold still generates attractive returns as an alternative safe haven. For example, since 1971, gold has achieved an average return of 8.2% per year.

Earlier this year, the pension fund of chemical group DSM decided to invest a few hundred million euros in buy gold. That was about 5% of the total assets. The fund reduced its position in government bonds because they were no longer yielding returns. She put part of it in gold, another part in real estate and shares.

This contribution was made from Geotrendlines