case for gold optimal portfolio allocation

7172019 Case for Gold Optimal Portfolio Allocation

httpslidepdfcomreaderfullcase-for-gold-optimal-portfolio-allocation 17

Figure 1 shows a typical way o depicting

the Efficient Frontier between stock

and bonds indicating what the optima

portolio with the highest Sharpe ratio

would be the particular allocation to stock

and bonds respectively that would yield

the best risk-adjusted return Te theory

is not without its critics notably because

hindsight is ofen a key ingredient as to

how an Optimal Portolio is constructed

1

The Case for GoldOptimal Portfolio Allocation

Introduction

How can an investor get guidance

on how to construct a portolio

that will protect them should

the stock market have another losing

streak that lasts more than a ew days Inthis white paper we discuss this question

while specifically looking at the portolio

impact o gold

In our previous two gold white papers1 we

discussed key reasons investors typically

cite supporting an investment in gold as

well as the benefits that gold provides or

portolio diversification Tis white paper

ocuses on what the optimal portolio

allocation in gold would have been

according to Modern Portolio Teory

over several different periods o time

In 1934 the price o gold was $35 an ounce

as o February 28 2014 it was $1326

yielding an average return o about 5

Gold bugs might argue this suggests gold

should have a permanent place in investorsrsquo portolios Conversely however those

thinking the yellow metal is a barbarous

relic may only see themselves confirmed in

their view that gold is overpriced Keep in

mind the same point can be made about

stocks historical returns are not ldquoproordquo o

uture returns Without endorsing either

view letrsquos have a look at how an investor

could have combined gold and equities to

enhance risk-adjusted returns

Modern Portfolio Teory

One academic theory the Modern Portolio

Teory presents an Efficient Frontier an

investment mix that maximizes expected

returns or a given amount o expected

risk An Optimal Portolio provides the

highest risk-adjusted return ofen defined

by proessional investors as the portolio

with the highest Sharpe ratio a measure

o return per unit o risk as measured by

standard deviation o returns

ldquoOptimal Portfolio provides the highestrisk-adjusted returnrdquo

1 Please see Merk Investmentsrsquo Gold White Papers ldquoCase or Gold Invest in the Ultimate Currencyrdquo and ldquoCase or Gold Portolio Benefits o the Ultimate Currencyrdquo

March 2014

Merk In983158estments LLC reg

Figure 1 Efficient Frontier Example



ime Horizons Studied

Our paper analyzes what an Optimal

Portolio containing gold and equities

would have looked like over three different

time horizons

Past 10 years (daily data rombull

February 2004 ndash February 28 2014)

Since August 1971 (monthly databull

rom July 31 1971 ndash February 28 2014)

Since 1934 (monthly data rombull

December 31 1933 ndash February 28 2014)

While a 10-year horizon appears reasonably

long keep in mind that five years ago we

were right at the peak o the financial crisis

we wanted our time period to be long

enough to include ldquonormalrdquo times as well

as ldquocrisisrdquo For a longer historic comparison

2 March 2014


o over 30 years we choose August 1971

as a reerence point to gauge the long-term

perormance o gold it was on August

15 1971 that President Nixon ended the

convertibility o the dollar to gold

While that is truly a long-term horizon

one could argue that the gold price was

artificially depressed until then and as a

result any return calculated since then

might overstate the potential long-term

rate o return or gold o address that

criticism as a third variant we went all

the way back to the beginning o 1934

when the Gold Reserve Act changed the

nominal price o gold rom $2067 per

troy ounce to $35

Figure 2 10-Year Efficient Frontier of Stocks and Gold

100 allocation to Stocks

100 allocation to

Gold

Optimal Portfolio

600

700

800

900

1000

1100

1200

1300

1400

1250 1450 1650 1850 2050 2250 2450

A n n u a l i z e d r e t u r n

Annualized standard deviation

Efficient Frontier Stocks and Gold

February 28 2004 - February 28 2014

copy 2014 Merk Investments LLC

Equities SampP 500 Total Return Gold Spot Gold (XAU Curncy) Risk-Free Rate 3 Month Treasury billData Source Merk Investments Bloomberg Federal Reserve httpwwwmultplcoms-p-500-dividend-yieldtable

Figure 3 10-Year Optimal Portfolio of Stocks and Gold

Gold Allocation68

SampP 500 Allocation32

Annualized Return 1284 716

Annualized Risk(Standard Deviation of Returns)

2005 2038

Sharpe Ratio(Highest Ratio is Optimal Portfolio)

057 028

Gold vs SampP 500 - 10 Years

amp (() amp (+) Optimal Portfolio

Gold100

SampP 500100

1128

1551

063

(+) - 012345143 674 81234514 928

By going back that ar we had to limit

ourselves to a comparison between

gold and stocks (using the SampP 500)

to reduce data quality issues with bond

indices i we wanted to include bonds

We include dividends in equity returns

and consider a ldquorisk reerdquo rate to find

the Optimal Portolio Also note

Te SampP 500 Index was onlybull

created in 1957 but a composite o

the index is available that we believe is

a good representation o the preceding

years

Dividend inormation is notbull

readily available or all years As aresult we relied on research o others

Since 1934 the average dividend yield

o the SampP 500 has been approximately

369

When studying the results o our analysi

and the accompanying figures please keep

in mind

Tese are not investmenbull

recommendations

Tese models use perect hindsightbull

ie suggesting what would have been the

Optimal Portolio given the returns and

risks prevalent during the period

Te Optimal Portolios are chosenbull

in the beginning o the period and never

rebalanced In a uture analysis we wil

discuss the impact o periodic rebalancing

Te 10-Year View

Figure 2 shows the Efficient Frontier

between stocks and gold over a 10-year

time horizon We used the SampP 500 Index

as a proxy or the stock market Figure 3

summarizes the allocation to gold and

stocks (SampP 500) respectively that



100 allocation to

Stocks

100 allocation to

Gold

Optimal Portfolio

800

850

900

950

1000

1050

1200 1400 1600 1800 2000 2200




July 31 1971 - February 28 2014


Equities SampP 500 Total Return Gold Spot Gold (XAU Curncy) Risk-Free Rate 3 Month Treasury billData Source Merk Investments Bloomberg Federal Reserve httpwwwmultplcoms-p-500-dividend-

3

would yield the Optimal Portolio or the

same time rame Tese findings suggest

that given a choice between investing in

the SampP 500 and gold an investor would

have had the best risk-adjusted returns

investing 68 in gold and 32 in theSampP 500 Allocating more to equities

might have yielded higher returns but

the volatility o returns would have been

substantially higher

Does this mean an investor should have

more than hal o their investable assets in

gold No among other reasons because

We donrsquot know what returns gold andbull

the SampP 500 will provide going orward

Te investment universe is comprisedbull

o more than the SampP 500 and gold

One possible conclusion is that adding anyuncorrelated asset to the SampP 500 may

improve an overall portolio But the data

also suggests that i onersquos outlook or gold

or the SampP 500 is different rom what it

has been in the past ten years the ldquooptimal

portoliordquo may look different For a longer

time period please see Figures 4 and 5

Te 30+ Year View

Going back to August 1971 the optimal

gold allocation drops rom 68 to 29

Mind you this includes the run-up in

1980 as well as the subsequent 20-year

bear market in gold that ollowed Itrsquos likely

there arenrsquot many investors that piled up

on gold and the SampP back in 1971 then

March 2014


ldquoAdding a goldallocation to stock

portfolio improved itsrisk-adjusted returnrdquo

never rebalanced their portolio Still the

takeaway should be that diversification

with uncorrelated assets matter as it is

possible to substantially lower the volatility

o a portolio by adding an uncorrelated

asset Tat applies despite the act that

gold was more volatile than the SampP 500

Figure 4 Efficient Frontier of Stocks and Gold Since 1971

Figure 5 Optimal Portfolio of Stocks and Gold Since 1971

Gold Allocation29




2023 1540


017 034039

$amp () +-(0( 12 3-(0( 45-36(

Optimal Portfolio

Gold100

SampP 500100

989

1243

Gold vs SampP 500 since 1971

789 lt =gt (A Blt $amp

ldquoDiversication withuncorrelated assetsmatters as it is possibleto substantially lowerthe volatility of a

portfolio by adding anuncorrelated assetrdquo

since 1971 (different rom the risk profile

over the most recent 5 year period where

gold was less volatile than the SampP 500)

Now letrsquos go back 80 years please look at

Figures 6 and 7 (next page)

Allocating 41 to gold since 1934 would

have according to the theory providedthe ldquooptimalrdquo risk adjusted return by

sacrificing just a little in return the overal

volatility o the portolio could have

been substantially lowered A couple o

caveats

Tere were restrictions on own goldbull

ownership or US persons rom 1933 ndash


httpslidepdfcomreaderfullcase-for-gold-optimal-portfolio-allocation 474 March 2014


Figure 6 Efficient Frontier of Stocks and Gold since 1934


100 allocation to

Gold

Optimal Portfolio

400

500

600

700

800

900

1000

1100

1000 1100 1200 1300 1400 1500 1600 1700




December 31 1933 - February 28 2014

Equities SampP 500 Total Return Gold Spot Gold (XAU Curncy) Risk-Free Rate 3 Month Treasury bill

Data Source Merk Investments Bloomberg Federal Reserve httpwwwmultplcoms-p-500-dividend-yieldtable copy 2014 Merk Investments LLC

Gold Allocation41




1538 1582


009 044


amp amp( ) + - amp

983

1139

055

Optimal Portfolio

Gold100

SampP 500100

0 amp 123 456789587 8 lt5678958 =gt6lt

Figure 7 Optimal Portfolio of Stocks and Gold since 1934

1974 the rules were amended over the

years effectively starting in 1964 US

persons were able to at least invest in gold

certificates

Until 1971 the price o gold was notbull

ree floating the model as a result gives

the appearance that gold was less risky

(ie the dollar price less volatile) than it

might have been in a ree market We are

talking about hidden risks here not well

captured when using historical standard

deviation o returns although the risk

was ultimately more to the US dollar that

plunged relative to gold once the yellow

metal was cut loose in 1971

Te above chart shows that the Opti-bull

mal Portolio is not at the tip o the curve

to understand why look back at Figure 1

to find the best risk-adjusted return the

portolio with the highest sharpe ratio it

is in the context o a benchmark risk-ree

return Since 1934 the average ldquorisk reerdquo

rate over the past 80 years was 367 Itrsquos

air to question using the same average

risk-ree rate or all those years

By using December 31 1933 as thebull

starting point we are putting gold at a

competitive disadvantage as the market

had plunged relative to the heights seen

beore the 1929 stock market crash At the

end o 2013 a Wall Street Journal article

reerenced the long-term annual return o

the SampP 500 as 55 since 1927 Alter-

natively we observed almost double the

amount at 1055 Aside rom the 1929

crash (rom which there was a partial re-covery by the end o 1933) the difference

is explained by the act that the returns

stated by the Wall Street Journal exclude

the reinvestment o dividends

Gold in a Balanced ldquo6040rdquo Portfolio

With this context provided letrsquos look

again at the past 10 years but this time

adding bonds into the mix We assume a

static 6040 ratio o stocks to bonds ofen

reerred to as a Balanced Portolio then

add the ldquooptimalrdquo amount o gold to the

mix ndash again using hindsight take a look at


Unlike the first example that suggested a

68 allocation to gold when combined

with stocks a 42 allocation to gold

added to a Balanced Portolio would have

yielded the Optimal Portolio Here gold

outperorms the balanced portolio by

a tad yet one can lower the overall risk

profile o a balanced portolio by adding

a gold component

Clearly past returns are no proo o uture

results Will the seemingly meteoric rise o

stocks continue Have we reached a peak

in bonds In act over the past 5 years

ldquoOne can lower theoverall risk prole ofa balanced portfolio

by adding a goldcomponent rdquo



Real estatebull

Commodities including goldbull

Currencies (directional) such as abull

managed basket o currencies

Currencies (non-directional) such asbull

an absolute return ldquolongshortrdquo strategy Managed uturesbull

Hedge undsbull

What Correlation

o find an Optimal Portolio itrsquos

important to understand how the

underlying securities in the portolio

interact with one another But thatrsquos not so

trivial as correlations across securities and

asset classes are not stable o illustrate the

point most have heard that the US dolla

benefits rom a ldquoflight to saetyrdquo Tat mayhave been the case or a little over two

years up to the summer o 2012 but ever

since then the ldquorisk onrdquo ldquorisk off rdquo trade

became more complicated

Or to quote another example when

money fled emerging market local debt

where investors thought they could have a

ree lunch picking up yield with little risk

such money didnrsquot go into the US dollar

but started to chase yields in government

bonds o weaker Eurozone countries

Or take gold there are periods it moves

in tandem with the stock market others

where it moves in the opposite direction

Indeed there are periods when gold has

been a hedge against a alling stock market

Gold Allocation42

Balanced 6040Portfolio 58


Annualized Risk(Standard Devaiation of Returns)

2005 1192

Sharpe Ratio(highest Ratio is Optimal Portfolio)

057 044

Gold vs Balanced 6040 Portfolio - 10 Years


074

(+) - 012345143 674 81234514 928

Gold100

Balanced 6040 Portfolio100

987

1135


5 March 2014

Figure 8 10-Year Efficient Frontier of Balanced Portfolio and Gold

Figure 9 10-Year Optimal Balanced Portfolio and Gold

100 allocation to

6040 Portfolio

100 allocation to

Gold

Optimal Portfolio

600

700

800

900

1000

1100

1200

1300

1400

1000 1200 1400 1600 1800 2000 2200



Efficient Frontier Gold and Balanced 6040 Portfolio




Bonds Barclays US Agg Total Return Value Index

Data Source Merk Investments Bloomberg Federal Reserve httpwwwmultplcoms-p-500-dividend-yieldtable

bonds came out way ahead as the volatilityin bonds was abnormally low this changed

as o the ldquotaper talkrdquo in early 2013 And

even i one likes the value proposition o

gold itrsquos only prudent to take into account

that gold price is volatile and its significant

price decline o -28 experienced in 2013

may repeat itsel rom time to time (As

o the writing this paper in March 2014

gold has rebounded by +12 in the first

10 weeks o the year) I one extrapolatedrom the recent negative returns o gold

the ldquooptimal portoliordquo may well suggest

a 0 allocation to gold assuming other

asset classes yield positive returns

What are the Other Alternatives

Most investors donrsquot allocate 30+ o their

portolios to gold neither can we make

such an investment recommendation But

as limited as the analysis here is we should

really be asking the opposite question

is it sensible or investors to have up to

70 possibly more o their portolio in

stocks Tis exercise shows that adding

investments with low correlation to stocks

may improve a portolio by enhancing itsrisk-adjusted return

Aside rom including international stocks

and bonds other candidates to consider

or inclusion in an investment portolio

are

ldquoAdding investmentswith low correlation tostocks may improve a

portfolio by enhancingits risk-adjustedreturnrdquo




2 An investor cannot invest directly in an index Alternative investments are represented by the ollowing indicesGold is represented by the Gold Spot price (USD per roy Ounce)bull

Currency Directional is represented by the Inverse US Dollar (Inv DXY) Index a measure o the inverse value o the United States dollar relative to a basket o oreign curren-bull

cies including EUR JPY GBP CAD CHF and SEKCurrency Non-Directional is represented by the Deutsche Bank Currency Returns Index - USD (DBCRUSI Index) Tis index captures the long term systematic returns bybull

systematically replicating the three strategies most widely employed in the FX market (Carry rade Momentum and Valuation)Real Estate is represented by the FSE NAREI US ALL REIs Index Tis index spans the commercial real estate space across the US economy It provides exposure to allbull

investment and property sectorsCommodities is represented by the DB Liquid Commodity Index Tis index serves as a liquid and diversified benchmark or commodities asset classbull

Managed Futures is represented by the Morningstaruml Diversified Futures Index (DFI) It provides a benchmark or exposure to global markets through exchange listed utures-bull

contracts in commodities currencies and equitiesHedge Funds is represented by the HFRX Global Hedge Fund Index is the global industry standard or perormance measurement across all aspects o the hedge und industrybull

International Equities are represented by the MSCI EAFE Index Tis index measures the equity perormance o developed markets outside o the US and Canadabull

Correlation of Equities and Bonds versus Alternative Investments and International Equities

GoldCurrency

DirectionalCurrency Non-

DirectionalReal Estate Commodities

ManagedFutures

HedgeFunds

InternationalEquities

US Equities 007 015 024 080 031 -016 058 050

US Bonds 012 -014 011 -017 -014 002 -013 -011

Source Merk Investments Bloomberg Period 02282004 - 02282014

Figure 10 Correlation of Alternative In983158estments

the result is unbiased simply because you

let a computer generate results Indeed

one o the biggest challenges in presenting

Optimal Portolios is that they are heavily

influenced by the underlying assumptions

Someone can show you that a given

investment would have made a antastic

addition to your portolio but you may

want to look more closely whether theassumptions are realistic going orward

What Risk

Just as returns play a role so does risk In

finance a lot o investors employ standard

deviation o returns as a measure o risk

Yet many investors are just fine with

ldquoupside riskrdquo but do have a problem with

ldquodownside riskrdquo (therersquos a measure or

that the Sortino Ratio) Maybe just as

relevant these models are not very good

at capturing high risk low probability

events also called market crashes In other

words an optimization analysis that uses

historical returns may understate risk i

the time period used does not capture a

market crash in that given asset Further

many measures o risk are relative to a

benchmark ldquorisk reerdquo rate but in todayrsquos

world one might argue that therersquos no

such thing as a risk ree investment in an

environment with negative real interest

rates placing onersquos purchasing power is at

risk no matter what one does

Optimal Portfolio Really

Te takeaway rom this exercise may

be to look at alternatives in general as asupplement to a traditional equity and

bond portolio Investors may want to

take a pro-active approach to learn how to

add value to a portolio keeping an open

mind about the risks and opportunities

out there especially afer the run-up the

stock market has had

o invest profitably it may be more about

developing a robust investment process

rather than plugging in make believe

numbers into a model We will publish

more analyses on how to diversiy in

times like these Please subscribe to Merk

Insights and ollow us on witter to be

inormed as we publish more analyses

on how to diversiy in times like these

Finally please read our gold white papers

amp reports

but itrsquos not always inversely correlated with

the stock market Gold may also thrive in

a rising interest rate environment as it did

in the late 1970s

Figure 10 shows a selection o otheralternative investments2 and how they

correlate to both equities and bonds

Note that in recent years international

equities have had a comparatively high

correlation to the SampP 500 We have been

arguing or some time that investors in

international stocks may have primarily

been receiving additional return through

commensurately higher risk rather than

improving the overall returnrisk profile o

their portolios As a result we encourage

investors to consider truer orms o

diversification noting that currency

strategies may provide particularly low

correlation to US stocks and bonds Gold

is a well-known way to diversiy out o the

US dollar however there may be other

opportunities worth exploring urther

What Return

Te theory works best when we plug in

ldquoexpectedrdquo returns Wouldnrsquot it be great i

we knew tomorrowrsquos return In practice

many investors use historical returns As

you might imagine these models heavily

avors assets that had a good return during

the given look-back period ndash so donrsquot think



To Learn about the potential portfolio benets of adding gold to your investment portfolio please sign up to our newsletter Merk Insights at

wwwmerkinvestmentscomnewsletter

About the Authors

Axel Merk is the President and CIO o Merk Investments manager o the Merk Funds An authority on gold and other hard

currencies he is a pioneer in the use o strategic currency investing to seek diversification Axel Merk is a sought afer speake

and author on topics ranging rom the economy gold and currencies to sustainable wealth and personal finance as well as a

regular guest and contributor to the business media around the world

Perormance data quoted represents past perormance Past perormance is no guarantee o uture results Due to market 983158olatility curren

perormance may be less or higher than the figures shown In983158estment return and principal value will fluctuate so that upon redemption shares may be worth more or less than their original cost It is not possible to in983158est directly in an index

Tis report was prepared by Merk In983158estments LLC and reflects the current opinion o the authors It is based upon sources and data

believed to be accurate and reliable Merk In983158estments LLC makes no representation regarding the advisability o in983158esting in the products

herein Opinions and orward-looking statements expressed are subject to change without notice Tis inormation does not constitute

in983158estment advice and is not intended as an endorsement o any specific in983158estment Te inormation contained herein is general in nature

and is pro983158ided solely or educational and inormational purposes Te inormation pro983158ided does not constitute legal financial or tax

advice You should obtain advice specific to your circumstances fom your own legal financial and tax advisors As with any in983158estment

past perormance is no guarantee o uture perormance

Explicit permission must be obtained from Merk Investments LLC in order to replicate copy distribute or quote from this

document or any portion thereof

Published by Merk Investments LLC March 2014


7 March 2014

For more inormation please contact us

(866) 637-5386

wwwmerkinvestmentscom

copy 2014 Merk Investments LLCreg



ime Horizons Studied

Our paper analyzes what an Optimal

Portolio containing gold and equities

would have looked like over three different

time horizons

Past 10 years (daily data rombull

February 2004 ndash February 28 2014)

Since August 1971 (monthly databull

rom July 31 1971 ndash February 28 2014)

Since 1934 (monthly data rombull

December 31 1933 ndash February 28 2014)

While a 10-year horizon appears reasonably

long keep in mind that five years ago we

were right at the peak o the financial crisis

we wanted our time period to be long

enough to include ldquonormalrdquo times as well

as ldquocrisisrdquo For a longer historic comparison

2 March 2014


o over 30 years we choose August 1971

as a reerence point to gauge the long-term

perormance o gold it was on August

15 1971 that President Nixon ended the

convertibility o the dollar to gold

While that is truly a long-term horizon

one could argue that the gold price was

artificially depressed until then and as a

result any return calculated since then

might overstate the potential long-term

rate o return or gold o address that

criticism as a third variant we went all

the way back to the beginning o 1934

when the Gold Reserve Act changed the

nominal price o gold rom $2067 per

troy ounce to $35

Figure 2 10-Year Efficient Frontier of Stocks and Gold


100 allocation to

Gold

Optimal Portfolio

600

700

800

900

1000

1100

1200

1300

1400

1250 1450 1650 1850 2050 2250 2450






Equities SampP 500 Total Return Gold Spot Gold (XAU Curncy) Risk-Free Rate 3 Month Treasury billData Source Merk Investments Bloomberg Federal Reserve httpwwwmultplcoms-p-500-dividend-yieldtable

Figure 3 10-Year Optimal Portfolio of Stocks and Gold

Gold Allocation68




2005 2038


057 028

Gold vs SampP 500 - 10 Years


Gold100

SampP 500100

1128

1551

063

(+) - 012345143 674 81234514 928

By going back that ar we had to limit

ourselves to a comparison between

gold and stocks (using the SampP 500)

to reduce data quality issues with bond

indices i we wanted to include bonds

We include dividends in equity returns

and consider a ldquorisk reerdquo rate to find

the Optimal Portolio Also note

Te SampP 500 Index was onlybull

created in 1957 but a composite o

the index is available that we believe is

a good representation o the preceding

years

Dividend inormation is notbull

readily available or all years As aresult we relied on research o others

Since 1934 the average dividend yield

o the SampP 500 has been approximately

369

When studying the results o our analysi

and the accompanying figures please keep

in mind

Tese are not investmenbull

recommendations

Tese models use perect hindsightbull

ie suggesting what would have been the

Optimal Portolio given the returns and

risks prevalent during the period

Te Optimal Portolios are chosenbull

in the beginning o the period and never

rebalanced In a uture analysis we wil

discuss the impact o periodic rebalancing

Te 10-Year View

Figure 2 shows the Efficient Frontier

between stocks and gold over a 10-year

time horizon We used the SampP 500 Index

as a proxy or the stock market Figure 3

summarizes the allocation to gold and

stocks (SampP 500) respectively that



100 allocation to

Stocks

100 allocation to

Gold

Optimal Portfolio

800

850

900

950

1000

1050

1200 1400 1600 1800 2000 2200




July 31 1971 - February 28 2014



3
























Te 30+ Year View








March 2014













Gold Allocation29




2023 1540


017 034039

$amp () +-(0( 12 3-(0( 45-36(

Optimal Portfolio

Gold100

SampP 500100

989

1243















caveats








100 allocation to

Gold

Optimal Portfolio

400

500

600

700

800

900

1000

1100

1000 1100 1200 1300 1400 1500 1600 1700







Gold Allocation41




1538 1582


009 044


amp amp( ) + - amp

983

1139

055

Optimal Portfolio

Gold100

SampP 500100

0 amp 123 456789587 8 lt5678958 =gt6lt





certificates





















































a gold component









Real estatebull






Hedge undsbull

What Correlation
























Gold Allocation42




2005 1192


057 044



074

(+) - 012345143 674 81234514 928

Gold100


987

1135


5 March 2014



100 allocation to

6040 Portfolio

100 allocation to

Gold

Optimal Portfolio

600

700

800

900

1000

1100

1200

1300

1400

1000 1200 1400 1600 1800 2000 2200




































are















GoldCurrency



ManagedFutures

HedgeFunds


US Equities 007 015 024 080 031 -016 058 050

US Bonds 012 -014 011 -017 -014 002 -013 -011












What Risk









































amp reports




in the late 1970s



















What Return












About the Authors


















7 March 2014


(866) 637-5386





100 allocation to

Stocks

100 allocation to

Gold

Optimal Portfolio

800

850

900

950

1000

1050

1200 1400 1600 1800 2000 2200




July 31 1971 - February 28 2014



3
























Te 30+ Year View








March 2014













Gold Allocation29




2023 1540


017 034039

$amp () +-(0( 12 3-(0( 45-36(

Optimal Portfolio

Gold100

SampP 500100

989

1243















caveats








100 allocation to

Gold

Optimal Portfolio

400

500

600

700

800

900

1000

1100

1000 1100 1200 1300 1400 1500 1600 1700







Gold Allocation41




1538 1582


009 044


amp amp( ) + - amp

983

1139

055

Optimal Portfolio

Gold100

SampP 500100

0 amp 123 456789587 8 lt5678958 =gt6lt





certificates





















































a gold component









Real estatebull






Hedge undsbull

What Correlation
























Gold Allocation42




2005 1192


057 044



074

(+) - 012345143 674 81234514 928

Gold100


987

1135


5 March 2014



100 allocation to

6040 Portfolio

100 allocation to

Gold

Optimal Portfolio

600

700

800

900

1000

1100

1200

1300

1400

1000 1200 1400 1600 1800 2000 2200




































are















GoldCurrency



ManagedFutures

HedgeFunds


US Equities 007 015 024 080 031 -016 058 050

US Bonds 012 -014 011 -017 -014 002 -013 -011












What Risk









































amp reports




in the late 1970s



















What Return












About the Authors


















7 March 2014


(866) 637-5386








100 allocation to

Gold

Optimal Portfolio

400

500

600

700

800

900

1000

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1000 1100 1200 1300 1400 1500 1600 1700







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What Correlation
























Gold Allocation42




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Gold100


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5 March 2014



100 allocation to

6040 Portfolio

100 allocation to

Gold

Optimal Portfolio

600

700

800

900

1000

1100

1200

1300

1400

1000 1200 1400 1600 1800 2000 2200




































are















GoldCurrency



ManagedFutures

HedgeFunds


US Equities 007 015 024 080 031 -016 058 050

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What Risk









































amp reports




in the late 1970s



















What Return












About the Authors


















7 March 2014


(866) 637-5386





Real estatebull






Hedge undsbull

What Correlation
























Gold Allocation42




2005 1192


057 044



074

(+) - 012345143 674 81234514 928

Gold100


987

1135


5 March 2014



100 allocation to

6040 Portfolio

100 allocation to

Gold

Optimal Portfolio

600

700

800

900

1000

1100

1200

1300

1400

1000 1200 1400 1600 1800 2000 2200




































are















GoldCurrency



ManagedFutures

HedgeFunds


US Equities 007 015 024 080 031 -016 058 050

US Bonds 012 -014 011 -017 -014 002 -013 -011












What Risk









































amp reports




in the late 1970s



















What Return












About the Authors


















7 March 2014


(866) 637-5386















GoldCurrency



ManagedFutures

HedgeFunds


US Equities 007 015 024 080 031 -016 058 050

US Bonds 012 -014 011 -017 -014 002 -013 -011












What Risk









































amp reports




in the late 1970s



















What Return












About the Authors


















7 March 2014


(866) 637-5386







About the Authors


















7 March 2014


(866) 637-5386



case for gold optimal portfolio allocation

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