Importance of Gold as an Asset Class - Essay Example

Download file to see previous pages As a credit controller at the National Commercial Bank of the Kingdom of Saudi Arabia, I observed many misinformed investors putting money in inappropriate investment products. These observations prompted my consideration of allocation to commodities such as gold.

In order to diversify my portfolio, I invested in gold at 1286 USD/Oz on April 28, 2014, and I have observed a 26 dollar per ounce increase in price following news of the escalation of the Ukraine crisis, the US job report, the devaluation of the Yuan and an increase in gold imports from China. However, on June 2, 2014, gold dropped to around 1234USD per ounce after a severe hedge fund selling. Gold was sold, to cover losses on bonds as a result of the rising yields. Simultaneously people were selling gold to buy stocks as good economic data boosted the US stock market. By June 10, 2014, the price of gold rose again to around 1260 USD/Oz, following a decrease in the US stock market. From this, we can clearly see that gold prices are influenced by contrasting economic and political forces. From the behaviors of investors under negative world economic events, it is very clear that gold has an effective hedge against these assets and, therefore, can provide diversification benefits to investors. As investors start questioning equity under these negative economic events gold will still remain a popular option.
2.2 Survey
2.2.1 Survey Introduction
The survey was conducted to further investigate; the different attitudes to investments in gold, type of preferred investments, expectations of the market, and allocation to investments. In the survey, the main target was professional and retail investors.
2.2.2 Survey results
2.2.2.1 Age and investment attitude

Figure 1
The respondents included people aged above 30 years. These were either investment professionals or ordinary investors, with moderate to a good experience in the field of investing in gold. Figure 1 indicates that respondents aged above 40 (6 out of 8 respondents are aged above 40) believe that gold is a popular investment for mature investors. This may be because they have higher incomes than other age groups. ...Download file to see next pages Read More