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I recently read the Intelligent Asset Allocator by William Bernstein and I found it very interesting. I currently use stocks and bonds for asset allocation but I was intrigued by the non-correlation he stated between Precious Metals and the US Index. I ran my own numbers from 1994 to today based on two TD Mutual Funds (TD Canadian Index and TD Precious Metals) as opposed to ETFs because these guys had 15 years of data, and I found a correlation of over 0.8 between these two funds which shouldn't be that much of a surprise considering the weight of Precious Metals in the TSX, but for people who are thinking of using Gold companies as a hedge, it may work v. the S&P but apparently not the TSX

...since 1994 anyways :)
 

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Great point refutor. I've suspected that the correlation of precious metals to TSX was probably high because XIU has more than 10% in gold stocks and if we use Bernstein's 2% allocation as a guideline, Canadian investors with 20% allocation to local markets will already have enough exposure to gold. Your correlation findings give even more ammunition to this argument.
 

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Makes sense that gold is already well-represented within Canadian ETFs since it's such a major part of our indexes. I don't own any Canadian equity ETFs, I own the individual stocks instead. So I'm also looking to get some individual gold stocks, probably Barrick and Kinross.
 
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