How This Suit Analogy Still Shows The Value Of Gold

Investors can still rely on gold for wealth preservation
By TheStreet Staff ,

Gold's greatest merit is still its reliability as an instrument for wealth preservation, said Ani Markova, Vice-President & Portfolio Manager, AGF Investments.

 "Gold is an asset class that investors should have in their portfolios to diversify them, especially at times when we see equity market volatility," Markova told Kitco News on the sidelines of the Mines & Money conference in Toronto.

 Longer term, investors should depend on gold's wealth preservation power, Markova said, citing gold price's parity to the cost of a suit over time as an example of its steady relative value.

 "If you wanted to buy a men's suit back in the 1930s, you probably would have paid about $16.95 for a good quality suit and you throw in pair of shoes for $3.25, which is about $20, and that was roughly the cost of one ounce of gold in the beginning of the '30s" Markova said. "If I look today, at U.S. dollar terms, we are at about $1,200 U.S. and if you walk into Harren Rosen suit for about that."

 On portfolio allocation, Markova said that historically, her firm has been recommending investors to hold 1-5% of their portfolio in gold, but other schools of thought are practiced as well.

 "I've seen studies that indicate that even higher exposures, maybe around 20-25% is going to yield the proper diversification in one's portfolio because it does provide that risk adjustment, especially at a time of crisis," she said.

This article was written by a staff member of TheStreet.

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