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Although gold has been around for thousands of years, its role in diversified portfolios is not well understood. The authors critically examined such popular stories as “gold is an inflation hedge.” Investors face the following dilemma: The real price of gold is historically very high and may revert to the mean, but if prominent emerging markets increase their gold holdings, the real price of gold may rise even further from today’s elevated levels.

About the Author(s)

Claude B. Erb CFA

Claude Erb, CFA, is in Los Angeles, California.

Campbell Harvey
Campbell R. Harvey

Campbell R. Harvey is professor of finance at Duke University and a research associate of the National Bureau of Economic Research in Cambridge, Massachusetts. He served as editor of the Journal of Finance from 2006 to 2012. In 2016, he was elected president of the American Finance Association.