Gold as an Investment Asset

The efficiency of gold as a portfolio component over 1978 - 1995 is examined here from the perspective of seven major industrialized countries. Gold offers diversification benefits but dismal performance in terms of a risk-return trade-off. As a result, the inclusion of gold in test portfolios did not provide any increase in risk-adjusted return over the period as a whole. It was an attractive component of a diversified portfolio only for the subperiod 1978 - 1983 and never thereafter.