Gold has been long viewed as a store of value and still plays an implicit role as a monetary asset despite the fact that it has not been directly convertible into the U.S. Dollar since 1971. Gold is unique as a precious metal, with very little direct industrial use. As a result, most of the gold mined throughout history is still a part of the existing supply.
Over the last couple years, with record low Treasury yields rendering portfolio diversification less effective, we have seen a growing number of institutional clients consider tactical and strategic investments to gold. In this review, we focus on four viable implementation approaches for institutional investors to access the gold bullion market:
- Vaulted physical bullion
- Exchange-Traded Funds (ETFs) backed by physical bullion
- Over-The-Counter (OTC) Forwards and Swaps
- Exchange-traded futures