The World's Longest Term Investors Are Buying This Now

Central bank reserve managers are buying gold right now. Lots of gold.

The World's Longest Term Investors Are Buying This Now

What is a central bank? Merriam-Webster defines it this way: "a national bank that operates to establish monetary and fiscal policy and to control the money supply and interest rate."

Every country has a central bank. In the U.S. it is the Federal Reserve. In England, it's called the Bank of England. In Australia it's called the Reserve Bank of Australia. In China, it's called the People's Bank of China.

Central banks are some of the longest-term investors around. They are the smart money and they are accumulating gold now.

If some of the smartest minds in the world are buying gold, it makes you think – "Do I own enough gold?"

Consider these 3 facts just released by the World Gold Council:

  1. Central bank net purchases totaled 145.5 metric tons in the first quarter.
  2. This central bank gold buying was the strongest first quarter in 6 years.
  3. A diverse breadth of central banks continued to buy gold: 9 central banks added more than a tonne to their reserves in the first quarter.

Governments and central banks around the world buy gold for the same reason that individuals do – wealth preservation, portfolio diversification, a liquidity source, a hedge against currency devaluation and the list goes on.

The strong central bank gold buying seen in the first quarter of 2019 follows a 50-year high in purchases last year. The relentless gold buying spree continues.

China bought a whopping 33 metric tons in the first three months of 2019. Ecuador, Turkey and India were also notable gold buyers.

How much gold should you own?

Many investors wonder how much gold to buy. It turns out that portfolio allocation research found that investors who hold between 2% to 10% of their portfolio in gold can significantly improve performance.

For example, if you want to maximize protection for your $200,000 retirement portfolio that means it should contain about $20,000 worth of gold. With gold trading at $1,280 an ounce that means you should own about 15 1/2 ounces of gold to effectively diversify your portfolio.

One of the most important attributes that gold has is that it helps investors manage risk more effectively. When the smartest money managers are buying gold for the long-term, shouldn't you be too?