“Gold is not a trade but essential portfolio insurance”

”Gold is essential Portfolio insurance”

“Sebastian Lyon, manager of the £3.6bn Troy Trojan fund, believes the policies of US President Donald Trump will be positive for gold which was one of his top-performing assets in 2016. Gold has been a strong performer during 2016 with several of the best performing funds last year investing in the precious metal, Some of these have continued this trend in the first month of 2017. In total, manager Lyon holds around 10% of the fund in the precious metal. Lyon favours gold for its return and also diversification characteristics, which proves useful in times of market stress and as portfolio insurance the expectation is that Trump’s policies of reflation in the US will push up the asset’s prices across the board in 2017. If Trump’s policies of reflation gain traction, the outcome is likely to be inflationary which would be positive for gold. If inflation is not forthcoming deflation will take hold once more, leading to renewed aggressive unconventional monetary policy in the United States. For the patient, gold is not a trade but essential portfolio insurance. Lyon admitted gold suffered in the last three months of the year, with its price falling around 12% over the last quarter after Trump won the US election, causing euphoria in global markets. However, he noted gold had returned 8.6% in dollar terms and 29% in sterling terms during 2016 as a whole, making it one of the best-performing assets in most portfolio’s. This year so far has seen the price of gold rising once again, rising around 8% since the beginning of the year”