Put 5 percent in gold to shield against price swings

Investors seeking protection from both inflation and deflation should allocate 5 percent of their portfolios to gold, according to a report released on Monday by analysts Oxford Economics and commissioned by the World Gold Council.

The study, titled "The impact of inflation and deflation on the case for gold", found the 5 percent allocation was the optimal one in a base long-term economic scenario featuring 2.25 percent growth and 2 percent inflation, although this allocation would rise as either inflation took hold or price pressures retreated along with a contraction in growth.

The gold price, which has risen by 9 percent so far this year, hit a record high of $1,575.79 an ounce in early May, driven in part by investors whose key concerns were unrest across the Arab world and the threat to growth in both the developed and emerging markets from inflation.

"(The study) suggests that, in an optimal portfolio, you should have 5 percent in physical gold and that will come as a surprise to some investors," Marcus Grubb, managing director of investment, the World Gold Council, told Reuters.

Source: UK.Reuters.com