Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

Gold is an asset that tends to divide opinion, with plenty of staunch adherents and others who see it as an ancient throwback, but there are lots of reasons for investors to consider including a modest allocation in their portfolio.

One of the best ways to think about it is as an uncorrelated store of value that can protect your wealth against the effects of inflation over the long-term. There are periods when the price can be quite volatile, yet it tends to do well at times of market stress, thereby providing a form of portfolio insurance that can reduce your overall level of risk.

Why has gold done so well recently?

Gold has done really well recently with the price increasing from around $2,000 per troy ounce at the end of last year to about $2,400, a new all-time high. There are various reasons for this including strong buying by China, both from the private sector and the central bank, with the latter using it as a way to diversify its dollar-based reserves at a time of mounting tensions with the west.

Another factor is the huge budget deficit in the US that is being funded by the issuance of unprecedented levels of government bonds and Treasury bills. This additional torrent of dollar-denominated debt has reduced the appeal of the currency relative to gold, whose supply is outside of the control of the authorities.

An option from the Select 50

If you decide to include the precious metal in your portfolio then you might want to think about using the iShares Physical Gold ETC, which is a member of Fidelity’s Select 50 list of handpicked funds. It is a large, liquid security that is traded on the London Stock Exchange and aims to track the return of the gold spot price.

The exchange traded commodity (ETC) offers investors an easily accessible and transparent exposure to the precious metal. It is designed to replicate the day-to-day movement of the price of gold, less fees, by holding gold bullion. At the end of April this amounted to an incredible 197.49 tonnes1, with the bars safely segregated and kept in a secure location.

How has it performed?

Over the 5 years to the end of April the iShares Physical Gold ETC generated an annualised return of 12.29%. This was very close to the 12.46% produced by its benchmark, the LBMA Gold Price1. Please remember past performance is not a reliable indicator of future returns.

If you are thinking of investing, it is important to be aware that the shorter-term performance can be more volatile than these figures suggest. For example, looking back over the last decade there have been 5 calendar years of negative returns and 4 where there was a positive double digit increase1.

No income

Another point to consider is that there is no income, which is particularly relevant at the moment with many savings accounts and low risk money market funds yielding around 5%. Please note this yield is not guaranteed and will fluctuate in line with interest rate movements. The corollary to this is that if interest rates come down more than expected it could increase the appeal of gold still further.

How do the costs stack up?

It is good to see that the Total Expense Ratio is a very modest 0.12%1.

More on iShares Physical Gold ETC

(%)
As at 31 May
2019-2020 2020-2021 2021-2022 2022-2023 2023-2024
Gold 32.0 6.2 -3.8 6.4 17.8

Past performance is not a reliable indicator of future returns.
Source: Refinitiv, S&P GSCI Gold total returns in US$ from 31.5.19 to 31.5.24. Excludes initial charge.

Source:
1 iShares by BlackRock, 30 April factsheet. Performance data is in USD on a NAV basis.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Select 50 is not a personal recommendation to buy or sell a fund. There is no guarantee that the investment objective of any Index Tracking Sub-Fund will be achieved. The performance of the sub-fund may not match the performance of the index it tracks due to factors including, but not limited to, the investment strategy used, fees and expenses and taxes. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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Nick Sudbury

Nick Sudbury

Investment writer


Ed Monk

Ed Monk

Fidelity International


Ed Monk

Ed Monk

Fidelity International