Gold has been one of the best-performing assets since 2008 as investors have flocked to so-called safe havens in the wake of the global financial crisis and recession. Over ten years, the yellow metal is up close to 300%.
However, critics of the asset point out that gold is a non-productive asset that generates no income, has no growth prospects and does not provide a return. Furthermore, it has no major industrial function unlike metals such as silver and platinum.
In its December Investment Outlook report, SEB noted that high public debt and loose monetary policy is likely to persist for some time to come, strengthening the case for holding gold.
“Over time, the gold price trend has correlated closely with the increase in debt, especially that of the United States, since gold is traded in dollars and the dollar has been tied to gold for extended periods,” the report said.
“Recently, the focus has increasingly been on the increase in public and global debt levels. Many view the exponential growth in global debt as a serious threat.”
SEB also pointed out that building an investment portfolio often involves two fundamental concepts – protecting the investor against the risk of permanent losses and protecting them against the risk of lost purchasing power.
“Gold primarily satises the requirement of protection against the loss of purchasing power. However, it is not considered useful as protection against the risk of permanent losses,” the outlook said.
“Still, gold is often included in large investment portfolios where the main argument for holding it is as protection against ination or system crashes.”
