đź“ť usncan Note: A 10% Gold Position Can Pay Off Big In Crises
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ISTANBUL, TURKEY – APRIL 17: A 100 gram gold bar is seen in a gold shop window on April 17, 2025 in Istanbul, Turkey. Gold prices have surged past the $3.300 per ounce mark amid escalating tensions in the U.S.-China tariff war. (Photo by Chris McGrath/Getty Images)
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Some may regard gold as a low-yield relic. However, the data reveals a different narrative – one that indicates even a slight 10% allocation could enhance client portfolios without compromising substantial returns. You gain reduced volatility, nearly guaranteed protection during the worst market conditions, and what do you pay for that? Very little. Gold appears to be an obvious choice. Also, see our take on – Will Gold Shine When Markets Are Dim?
The Sharpe Ratio Advantage
Over the past five and ten years, substituting 10% of an all-equity SPY portfolio with GLD only reduced annualized returns by 0.2%. The benefit? Annual volatility decreased by about 1.4 percentage points, increasing the portfolio’s Sharpe ratio (a measure of risk-adjusted return). During the last decade, a portfolio with a 10% gold allocation experienced a Sharpe of 83%, compared to approximately 78% for a 100% equity portfolio. Gold’s low correlation with equities often turns negative during significant crises, amplifying diversification benefits precisely when portfolios require it the most.
Returns and Volatility Comparison
Trefis
Downside Protection That Works
In the last decade’s 20 worst SPY months, a 90% SPY / 10% gold portfolio outperformed the pure-SPY portfolio in nearly all instances. In other words, gold consistently mitigated equity market shocks – just when clients are most prone to panic and sell. This feature can help keep clients invested during volatility, enhancing long-term results. Notably, in March 2025 – when the S&P 500 declined by 5.6%, the 10% gold allocation provided an additional gain of +1.6%, highlighting its capacity to excel during sudden market turmoil.
Certainly, there are some disadvantages as well. Gold does not generate income, and its performance may lag in fervent bull markets. Nevertheless, history demonstrates that gold has consistently maintained purchasing power during significant upheavals – wars, recessions, inflation surges, and currency crises. It is also one of the few asset classes with nearly no counter-party risk, highly liquid even under market stress, and trusted by central banks globally – which have been accumulating it for more than a decade.
Bottom Line: A 10% gold allocation has provided lower volatility, improved risk-adjusted returns, and consistent downside protection in recent history – all for a minimal return trade-off.
Allocating a portion of the portfolio to gold is not the only approach. We adopt a macro-conscious strategy to asset allocation even within equities – adjusting exposure across sectors and styles in the High Quality Portfolio.
