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I’ve made the case that owning gold could be a good alternative asset as a part of a portfolio, but how does owning gold compare to owning precious metals equities (PMEs)?

As can be seen in the graph taken from William Bernstein’s book, Skating Where the Puck Was (data from Ken French “gold” series), PMEs also have a low correlation to stocks.

Bernstein notes that the lowest correlations occurred in the 1990s when only “stout-hearted, disciplined investors who knew that the asset class’ miserable recent returns had produced compelling valuations, and, moreover, who would not sell out during a generalized rout.” Correlations, of course, increased in following years as PMEs produced great returns.

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