Gold in the Investment Portfolio

The paper examines the key drivers of gold investment. Since 2000 the gold price has risendrastically, making gold an interesting add-on to a portfolio. As gold futures have negativeroll returns, gold pool accounts are characterized by high credit risk and physical possessionof gold means high transaction costs, Xetra-Gold might be the most efficient way to enter themarket. Xetra-Gold is a product created by the Deutsche Börse in 2007, which is handled likea security but can be exchanged into physical gold any time. In the portfolio context gold hashad a positive impact on Euro and USD portfolios between 2000 and 2006 due to considerablereturns and low correlation to other assets. However, this has not been true for almost allother periods, the correlation was always low but the returns of gold were almost zero, overridingthe positive diversification effect.