Asian Portfolio Advisers Recommend 10% Exposure To Gold — INTL FCStone
(Kitco News) - Asian banks and wealth advisers have upped their recommended percentage of gold holdings in a portfolio to 10% from 5%, according to a joint survey conducted by INTL FCStone and Hubbis.
“Some private banks and wealth advisers advise that their HNW clients hold as much as 5-10% of any portfolio in gold. This is up from the past where private banks and wealth advisers typically advised that their HNW clients hold about 3-5% of gold in their portfolio,” INTL FCStone said in its 2018 Going For Gold report.
The survey polled 174 private banks, wealth advisers and other market experts, focusing on high-net-worth (HNW) investors.
INTL FCStone highlighted that gold is a preferred portfolio diversifier that is easy to leverage.
“Using 1971 as a starting point, when the U.S. exited the gold standard and measuring to the gold price of approximately US$35 to the price of US$1,325 per ounce as at the end of Q1 2018, a price appreciation of roughly 3,700% was returned. This compares favorably to the Dow Jones Industrial Index, which in the same period, appreciated by approximately 2,800%,” wrote Martin Huxley, the firm’s head of precious metals for Asia.
The majority of Asian gold consumers still choose to physically store the yellow metal versus owning a gold exchange-traded fund.
“The physical side, it is considered more of a long-term hold, with HNW individuals holding it as part of a long-term balanced portfolio,” the report said.
And even though India and China already account for more than 50% of all global gold demand, INTL FCStone projects Asia’s consumer interest to only grow, citing a perfect mix of factors working in favor of the precious metal.
“Asia has all the ingredients to mix up the perfect cocktail of growth opportunity in the gold and precious metals service industry as it contains the perfect balance of economic prosperity and spending power. We are seeing increased demand from HNW individuals and families when it comes to purchasing and holding gold in Asia – particularly in Hong Kong and Singapore given their political and economic stability,” Huxley said.
One critical element supporting gold prices in the future will be mine production, which is expected to decline 1.3% within the next two years, the report pointed out, citing data from a Metals Focus report.
“This decline coupled with consistent gold demand could bode well for gold prices,” INTL FCStone said.
In the meantime, bullion production is continuing to thrive in Asia, with over 26 registered LBMA gold refineries across the region making the process of buying and storing gold cheaper, the report said.