commodity producers
Cash Flow Champions
Gold: A Commodity with Enduring Value
Date: February 13, 2025
Gold’s Long-Term Performance
As a tangible asset with intrinsic value, gold can play a valuable role in investor portfolios. Over the long term, the precious metal has proven to be both a store of value and a hedge against economic uncertainty.
Why Gold Remains a Popular Investment
For thousands of years, gold has been viewed as a valuable investment, prized for its scarcity, durability, and potential to appreciate over time. And despite advances in financial technology in recent decades, it remains as popular today as ever.
As a long-term investment, gold can offer a range of benefits including:
- Wealth preservation – Gold has historically proven to be a reliable store of value, preserving wealth over long periods. Unlike fiat currencies, which can be subject to devaluation, gold tends to maintain its value due to its scarcity.
- Portfolio diversification – Gold has a relatively low correlation to traditional asset classes such as equities and bonds. Therefore, it can help to diversify an investment portfolio.
- A hedge against uncertainty – Gold is considered to be a “safe-haven” asset. As a result, it often performs well during periods of economic uncertainty.
How Gold Can Help Diversify Investor Portfolios
Sources:
US equities: S&P 500 Index
US bonds: S&P US Aggregate Bond Index
US real estate: Dow Jones US Real Estate Index
Central Banks Are Buying Record Amounts of Gold
In recent years, the world’s central banks have bought substantial amounts of gold despite the fact that the price of the commodity has been hitting new all-time highs. These government institutions view the precious metal as a strategic asset that can help them diversify their reserves. One advantage of investing in physical gold is that there is no “counterparty risk.” Unlike an investment in fixed income securities or currencies, an investment in gold doesn’t rely on the creditworthiness of any institution or government.
Since 2010, the majority of gold purchases made by central banks have come from emerging market countries such as China, Russia, India, and Turkey. These countries have been buying gold to diversify away from the US dollar and protect their wealth against inflation and geopolitical risks.
In 2023, China was the largest buyer of gold, reporting an increase of 225 tonnes for the year.
The Case for Gold Miners
Gain Exposure to Gold Miners with the Themes Gold Miners ETF
The Themes Gold Miners ETF (AUMI) seeks to track the Solactive Global Pure Gold Miners Index (SOLGLPGM). This index provides exposure to the largest 30 companies that derive their revenues from gold mining activities.
Footnotes:
1 S&P Global, Major gold producers’ Q3 2024 all-in sustaining costs increase 4.9% QOQ, as of December 8, 2024
2 S&P Global, Large gold miners’ all-in sustaining costs rose 3.3% in Q4 2023, as of March 11, 2024
