All That’s Gold Does Not Glitter

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Financial Analysts Journal
December 2017 | Vol. 74 | No. 1 | 18 pages
Source: CFA Institute
Gerald R. Jensen, CFA Robert R. Johnson, CFA Kenneth M. Washer, CFA

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Summary

Spurred by economic uncertainty, interest in precious metals has increased dramatically. Investors target precious-metal funds for two primary reasons: (1) to capture an expected appreciation in precious-metal prices and (2) as a form of portfolio insurance. The authors compare the advantages and disadvantages of traditional funds with those of newer types of funds, including bullion, synthetics, and equity. They find tremendous variation in both fund returns and efficacy in serving the two primary investor motivations. Their findings imply that the success of a commodity investment hinges on the type of fund selected.


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