Gold’s role as a portfolio diversifier has gained attention as prices surpassed $4,000 this week, bolstered by central bank purchases and retail interest amid a weaker dollar and geopolitical tensions. Fund manager Christopher Cruden warned that investors buying gold for risk reduction might face unexpected losses, recalling a historical drop of 65-70% in gold prices in the early 1980s. His “Kintore” trading strategy, which systematically profits from both price increases and decreases, operates independently of gold’s value trend.
Jonathan Unwin from Mirabeau Wealth Management expressed skepticism about the sustainability of current gold prices, noting that while there’s strong demand, a potential correlation with other asset classes might diminish gold’s appeal. He anticipates possible profit-taking following the $4,000 milestone. Meanwhile, central banks, particularly China, have been purchasing significant quantities of gold, elevating its status among reserve assets, especially after the implications of sanctions against Russia.
Ray Dalio from Bridgewater Associates has recommended allocating about 15% of portfolios to gold, emphasizing its reliability when other assets falter.
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