What’s Working In A Portfolio? Gold

August 08, 2014

It’s tempting to call for a commodity rally, but it’s hard to see past the ‘shiny.’

The latest hiccup in the market has everyone scrambling for the next counter-correlated asset class that will save their portfolio when the S&P 500 really decides to take a dive.

But is anything working?

I think the answer is likely in commodities, but in particular, gold.

I’ll fend off the criticism with a leading “what are you, crazy!?” chart. Here’s what commodities have done for you for the last five years:


Our Analyst Pick ETF, the PowerShares DB Commodity ETF (DBC | C-26) has been pretty terrible, leaving you essentially flat for the last three years while the equity markets have been on a historic rally.

But that’s not really the point of commodities in a portfolio. The point is to provide a little bit of diversification when things go wrong (which they really haven’t in quite a while). So with this latest little blip in equity markets, has anything changed?


The short answer is: a little. In the past few days, as equity markets have come down, we’ve seen a bit of a rally in DBC (that bottom line). But let’s be honest, its small recompense for the long-term bad call we’ve faced. And year-to-date? It’s been a pure money loser.

But gold, as most folks know, has been having a bit of a comeback tour lately, and is handily beating the S&P 500 and other commodity sectors. In fact, if we peel back the onion on commodities, and just look at the sector exposure, we see things more clearly:


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