What investors are getting wrong about gold
Australian investors have been slower to invest in gold than their international peers – due in part to a perception the asset is only for those with “mega-bucks” – but they may be missing out on the precious metal’s counter-cyclical qualities.
Gold is back on investors’ minds after a sustained period of geopolitical and economic uncertainty, says World Gold Council head of Asia-Pacific, Shaokai Fan.
Jordan Eliseo pictured in ABC Bullion’s flagship store. Peter Rae
Gold, he says, has a different profile to other asset classes as, in addition to its price being supported by scarcity, when times are good, people purchase gold in the form of jewellery or electronics, but when times are bad, gold is purchased as a defensive asset. “It makes the correlation between gold and many other asset classes really, really low,” says Fan.
But he says Australians have been slower to move on gold due to this country’s relatively good economic performance and distance from geopolitical meltdowns.
In the first half of 2023, the price of gold increased 5.4 per cent in US dollar terms, to $US1912.25, according to the World Gold Council. In May, the precious metal nearly breached its record of $US2075, set in August 2020. “The last few years have been strong for gold retail demand,” says Fan.
It came off the back of more than three years defined by COVID-19, Russia’s invasion of Ukraine and, in the last year, central banks embarking on a global rate rising campaign while also participating in a record-breaking gold-buying streak.
“The reason that gold has been doing so well over the last year or so is because central banks have got back in the game again,” says David Tuckwell, investment strategist at ETF provider Global X.
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