Buy a little gold – it could help brighten the portfolio in 2023

IHAVE little idea where the price of gold is heading (does anyone?) But I do know that gold is a solid investment in troubled times, a good portfolio diversifier – and that plenty of central banks (including those bad boys in China and Russia) have been buying it up as if it is going out of fashion.

Strong demand, of course, results in higher prices – which is reflected in a gold price hovering around the £1,525 per ounce mark (16 per cent up on the price at the start of 2022).

Last month, I had a fascinating conversation with Sebastian Lyon, manager of the £6.5billion multiasset fund Trojan.

The chief investment officer of Troy Asset Management prides himself on protecting the value of money entrusted to him and his team by investors. Capital preservation is as important as growth.

It explains why Trojan has 12 per cent of its funds in gold-related assets – a mix of gold bullion securities, a gold exchange traded fund (Invesco Physical Gold) and shares in Canadian gold mining company Franco-Nevada.

‘For a long time, crypto-assets such as Bitcoin took the oxygen out of gold,’ Lyon told me. ‘But as we’ve found out in recent months, crypto-assets are like investing in US stocks listed on the Nasdaq that are on crack.’

He added that he was ‘sure’ gold would do its job this year as a ‘defensive asset’. So, buy a little gold.

Funds such as Trojan and Ruffer can give you limited exposure, as can vehicles such as BlackRock World Mining and JPMorgan Natural Resources (12 and 11 per cent invested in gold respectively). More focused funds include BlackRock Gold & General (investing primarily in gold companies) and iShares Physical Gold (which tracks the gold price).

I will leave you with one final statistic. According to online bullion trader Bullion-Vault, a portfolio split 60 per cent in the FTSE All-Share Index and 40 per cent in tenyear gilts returned 0.6 per cent per annum between 2018 and the end of last year.

Switching just 5 per cent of that portfolio into gold would have boosted the average annual return to 1.1 per cent.

Diversification pays.