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The only way to hold gold in a portfolio is through physical gold kept close by rather than listed gold, according to Panthera Solutions' Markus Schuller.

Schuller, a recent guest speaker at Citywire's Zurich and Geneva fund selector events, said investors should also steer clear of gold ETFs as access to the precious metal would become difficult in the event of another financial meltdown.

He told Citywire: 'Gold is usually pitched as great inflation hedge, which is not backed by empirical evidence, at least not in the sense of seeing a rising gold price as soon as inflation starts rising.'

Schuller said the biggest advantage of holding physical gold is as a hedge against a meltdown in the financial system but he does not expect such an event to occur over the medium term.

If it does, he argued, physical assets such as farmland and forestry, as well as physical gold, are also useful diversifying assets for an investor's portfolio.

'We are not expecting such a scenario in the near future, but after a series of unprecedented measures taken since 2008, central banks are/were rightfully concerned about still being considered as legitimised and trusted managers of the monetary system.'

He characterised a reoccurrence of another financial meltdown as a grey swan event - unlikely but not impossible.

'To protect oneself from such a scenario, it makes sense to hold physical gold as substitute for a fully functional monetary system. To be clear, one would only be protected if the gold is held physically and at an easily accessible location. This excludes banks and overseas deposits.'

'Also gold ETFs or other structured products which promise indirect access to gold, should be avoided as they require a fully functional code of law.'

 

Sunday April 6, 2014 by GMR