From Frank Holmes of U.S. Global Investors:

Gold stocks have historically ranked among some of the most volatile asset classes. Over any given one-year period, it is a non-event for gold stocks to move plus or minus 38 percent. This DNA of volatility is about three times that of gold bullion, which carries an annual volatility around 13 percent.

Despite this volatility, our research shows that investors can use gold stocks to enhance returns without adding risk to the portfolio.

In 1989, Wharton School finance professor Jeffrey Jaffe completed an academic study that illustrated the effects of portfolio diversification into gold stocks. Jaffe's original study covered the period from September 1971, just after President Nixon ended convertibility between gold and the dollar, to June 1987.

During Jaffe's study period, the average monthly return for the S&P 500 Index was...

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