Why gold is a good anchor for modern portfolios
Gold can be a natural diversifier and long-term hedge against inflation.
In a world of fast-changing technology and wide market swings, gold stands apart. It’s one of the few assets that doesn’t rely on any company, bond issuer or central bank promise to hold its value. That independence makes it especially valuable when trust in financial markets is shaken and volatility weighs on investors’ minds.
Gold can be a valuable diversifier and inflation hedge
One of gold’s biggest advantages is that it often moves in the opposite direction of stocks and bonds – especially when markets are under stress. When inflation increases above expectation or global tensions rise, gold has often climbed while stocks fall. It also doesn’t generally move in tandem with bonds, which largely rely on falling interest rates for performance. Gold has often held up its value when both stocks and bonds struggle, as markets saw in 2022.
It can also help protect against inflation. Over time, gold has helped protect people’s purchasing power through wars, recessions and currency declines. From the high inflation of the 1970s to the years of easy money post-2008, gold has shown its ability to hold its value. It may not match inflation every year, but over the long term, gold has tended to rise even when traditional currencies lost value.
Gold performance during market stress
When markets are under stress, gold has often moved in the opposite direction of stocks.
Source: Daily data from LBMA (London Bullion Market Association), S&P Global, U.S. Department of Treasury. 2000 Dot-com bust: March 1, 2000–Oct. 31, 2002; 2011 Eurozone debt crisis: April 1, 2011–Sept. 30, 2011; 2020 COVID shock: Jan. 1, 2020–Aug. 31, 2020; 2022 Inflation reset: Jan. 1, 2022–Oct. 31, 2022.
Gold in Sun Life ETF+ Portfolios1
Within Sun Life ETF+ Portfolios, gold can act a stabilizer – a way to balance faster-moving asset prices as the prevailing environment shifts. While the ETF+ Portfolios’ U.S. sector rotation sleeve looks for relative growth opportunities in U.S. equities, gold can help anchor the portfolios in something timeless and tangible.
By including gold, the ETF+ Portfolios can weather a wider range of market conditions without losing efficiency or liquidity. It can help smooth out volatility, protect against inflation and manage risk over time.
Gold connects performance and protection – it can help make the ETF+ Portfolios forward-thinking and more well balanced.
1Sun Life ETF+ Portfolios are mutual fund trusts that invest in a portfolio of ETFs and mutual funds and are actively managed by SLGI Asset Management Inc. Indirect exposure to gold is achieved by investing in underlying ETFs that seek to replicate the performance of the price of gold bullion.
Information contained in this article is provided for information purposes only. It is not intended to provide or be a substitute for professional, financial, tax, insurance, investment, legal or accounting advice and should not be relied upon in that regard. It also does not constitute a specific offer to buy and/or sell securities. You should always consult your financial advisor or tax specialist before undertaking any of the strategies discussed in this article to ensure that all elements and your personal circumstances are taken into consideration in developing your individual financial plan. Information contained in this article has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to its timeliness or accuracy and SLGI Asset Management Inc. disclaims any responsibility for any loss that may arise as a result of the use of the strategies discussed.