Gold has historically been recognized as a safe haven asset, a hedge against inflation, and an asset uncorrelated with equity markets. Since the end of the Bretton Woods system in 1971, gold has delivered an average nominal annual return of about +7%, while its real performance (adjusted for inflation) is approximately -1.5% per year. This distinction highlights that gold primarily preserves its value in nominal terms but does not generate a high real return over the long term.
During periods of high inflation, goldâs correlation with inflation is not perfect, as demonstrated in 2022 when, despite French inflation near 8%, gold declined by -0.4%. This phenomenon underscores that gold is not a perfect short-term inflation hedge. Nevertheless, its historically low correlation with equities makes it an excellent diversification tool, especially during stock market stress phases.
Gold ETFs and ETCs: Definitions and Specificities
Investing in physical gold via exchange-traded funds is mainly done through ETCs (Exchange-Traded Commodities), not pure ETFs, because gold does not fall under the European UCITS directive that governs traditional ETFs. ETCs replicate the price of physical gold, often through holding bars stored in vaults or via gold futures contracts.
This distinction is important for French investors because gold ETCs are not eligible for the Plan dâĂpargne en Actions (PEA). Therefore, they must be held in a standard securities account (Compte-Titres Ordinaire, CTO), which has specific tax implications to consider.
Main Gold ETCs Available to French Investors
Name
ISIN
Symbol
TER
Replication Type
Comment
iShares Physical Gold
IE00B4ND3602
IGLN / SGLD
0.12%
Physical (stored bars)
One of the most liquid and reputable gold ETCs, direct replication, low cost.
Amundi Physical Gold
FR0013416716
GOLD
0.15%
Physical
Very good European ETC, accessible to French investors, competitive fees.
WisdomTree Physical Gold
JE00B1VS3770
PHGP
0.39%
Physical
Higher fees, less liquid, but good issuer diversification.
These ETCs provide pure exposure to the gold price without significant counterparty risk since the gold is physically held. Their low TER (Total Expense Ratio) is a major advantage compared to other forms of gold investment.
Recent Performance and Macroeconomic Context
In 2022, marked by high inflation (8% in France), gold posted a negative performance of -0.4%, disappointing many investors who considered it an inflation shield. This disconnect is partly explained by rising real interest rates and a strong dollar, which generally weigh on gold prices.
Conversely, in 2023 and early 2024, gold reached historical highs, surpassing $2400 per ounce. This increase is notable as it occurred in a context of high interest rates, contradicting the belief that gold only performs in low-rate environments. These movements are linked to geopolitical tensions, increased market volatility, and sustained institutional demand.
Recommended Allocation and Investment Strategy
Given its risk-return profile and diversification role, it is generally advised to allocate between 5% and 10% of oneâs portfolio to gold via ETCs. This allocation allows benefiting from the decorrelation without overweighting an asset that does not generate income and can remain stable or decline over several years.
For French investors, the constraint of non-eligibility to the PEA limits investment to a CTO, requiring appropriate tax management. Purchasing gold ETCs is simple, liquid, and allows quick rebalancing to adjust exposure according to market conditions.
Alternative: ETFs on Gold Mining Companies (GDXJ)
For those seeking a more dynamic and potentially higher-yielding exposure, ETFs on gold mining companies offer an alternative. The best known is the VanEck Vectors Junior Gold Miners ETF (GDXJ - ISIN US92189F1066), which includes small and mid-cap mining companies.
Gold mining stocks provide natural leverage to the gold price: generally, their volatility is about three times that of physical gold. This means higher potential gains but also increased risks. This strategy is therefore suited to more experienced investors willing to endure high volatility.
Conclusion: Investing in Gold via ETFs/ETCs in 2024
Investing in gold through physical ETCs such as iShares Physical Gold (SGLD), Amundi Physical Gold (GOLD), or WisdomTree Physical Gold (PHGP) offers simple, low-cost, and liquid exposure to gold. Although gold is not eligible for the PEA and must be held via a CTO, it remains an important component in a diversified allocation, notably as a safe haven and partial inflation protection.
It is essential to have realistic expectations: gold does not guarantee a positive real return over the long term, and its ability to protect against inflation varies according to economic cycles. A moderate allocation of 5-10% is recommended, possibly complemented by exposure to gold mining stocks for investors seeking higher performance potential with greater volatility.
Disclaimer
The information provided in this article is for informational purposes only and does not constitute personalized investment advice. Investing involves risks, including capital loss. Before making any investment decision, it is recommended to consult a professional financial advisor and fully understand the characteristics, fees, and taxation of the chosen financial products.
