(Yicai Global) Dec. 1 -- Gold deserves more attention in China’s asset portfolios as its return outpaces that of most other investments, and as, elsewhere in the world, more and more investors are increasing their gold allocations to hedge against risk, according to the latest research.

The price of Chinese yuan-denominated gold has surged 9 percent so far this year, more than that of mainstream assets such as Chinese treasuries, currency funds and domestic commodities, the World Gold Council said in a research report released yesterday. Gold provides a stable annual return of nearly 7 percent in the long term, it added.

Most Chinese investors’ investment portfolios are dominated by stocks, bonds and cash, Yang Zhenhai, investment director of the council’s China arm, said as the release of the report. Yet, gold, as a low-correlation asset, can help spread the risk of a portfolio with mainly yuan assets.

Although some fund of funds, which are funds that invest in other investment funds, insurance asset management products and bank wealth management products include gold in their performance benchmarks, the proportion is low, he added.

Adding gold to portfolios is becoming a major trend in asset allocation for global investors, said Wang Lixin, chief executive officer of World Gold Council China.

Amid the uncertainties caused by the pandemic, geopolitical tensions and a global recession, gold has proven highly attractive to institutional investors, such as central banks, sovereign funds, pensions and funds, this year, the report said.

Central banks around the world bought the most gold this year since records began, marking the 13th consecutive year of a net increase in their gold holdings, according to World Gold Council data. In the third quarter, they purchased four-times the amount they bought the same time last year at 399.3 tons. As of the end of September, central banks had bought 673 tons so far this year.

National sovereign funds and large institutional investors are also increasing their gold allocations. Japan's Nikko Asset Management, for instance, has allocated 17 percent of a JPY320 billion (USD2.3 billion) fund to gold.

The main drivers of gold prices this year include interest rates, the buoyant US dollar and global uncertainty, which will continue to have an impact on gold performance, the report said. But as the market expects the US Federal Reserve to gradually slow the pace of its interest rate hikes, the impact on gold may weaken.

Editor: Kim Taylor