TOL - 5th Aug, 2024
4 factors that will see gold trading higher from here
Livewire sat down with gold expert Robin Tsui of State Street Global Advisors for some of the tailwinds pushing gold higher.
Gold prices have had a stellar 12 months, lifting 26.38% to US$2,476.00 an ounce over that period. A gold bar typically weighs 32 troy ounces (or 1kg), which means that a gold bar is now worth US$79,232 (or AUD$117,607).
For those who love the glitter of gold, there are a few different ways to get exposure without having to splash out more than $100,000 in cash (and likely more, given you have to store it somewhere safe). Take gold ETFs, for example, of which there are now a handful and track physical gold prices, or gold mining companies, which are far more complex.
But can gold prices continue to push higher given their already fantastic run?
According to State Street Global Advisors' Robin Tsui, four structural and cyclical factors will see gold prices trading higher from here. In this episode of The Pitch, he takes investors through them.
Note: This episode of The Pitch was recorded on 15 July 2024. You can watch the video or read an edited transcript below.
Edited Transcript
Ally Selby: Hello and welcome to The Pitch, brought to you by Livewire Markets. I'm Ally Selby, and today we're taking a look at some of the factors that can keep gold glittering over the short and long term. To do that, we're joined by State Street Global Advisors, Robin Tsui. Thanks so much for joining me today, Robin.
Robin Tsui: Thanks for having me.
Ally Selby: Gold prices have soared more than 20% over the past 12 months. What has driven that performance?What has driven gold's performance over the last year?
Robin Tsui: There's been three main factors that's been driving up gold prices. The first factor has been the extremely strong central bank buying, led by emerging market central banks in Asia. Secondly, the rising interest in gold through either ETFs, the physical market, or even the Future COMEX has seen a rise in those positions supporting gold prices. And thirdly, rising tensions around the world in the Middle East, Russia, and Ukraine have supported gold prices as well.
Ally Selby: What factors do you think will drive gold's performance over the next 12 months?The factors that will see gold continue to trade higher
Robin Tsui: So in the next 12 months, we see a few structural changes that should be positive for gold prices. First of all, the continuous strong buying by central banks, led by the emerging market central banks - which will likely continue to consume about 25% of the annual demand. Secondly, the rising tensions around the world and the spike in market risk volatility that we expect in the second half will likely continue to provide very strong support to gold prices in the second half of this year.
Ally Selby: And over the longer term, are there any factors that you could think could see gold trading higher?
Robin Tsui: Yes, the first one will be the central banks. Because as central banks continue to ramp up their exposure to gold, that's going to be quite a long-term story. And secondly, just the need for investors to diversify. Gold historically has really low correlations to other financial assets, and we believe that investors around the world are noticing that, the benefit of gold. And the need to increase the exposure to gold will be a structural change for the gold industry.
Ally Selby: How can investors actually get exposure to gold? Obviously, there are bullion and ETFs, there are gold miners as well. What's the difference between all those different ways to access gold?
How to get exposure to gold
Robin Tsui: There are many ways to invest in gold. The most typical way will be through physical gold. The consideration for physical gold is that you need to go to a store to buy it. Sometimes you have to pay a huge premium against the spot price, but the benefit is that you get to hold the gold and see the gold.
Another way is to buy through gold-backed ETFs. Gold-backed ETFs trade like a stock. It tracks the gold price. It's very easy for investors to trade. They are a lot cheaper as well. But the implication or consideration is you need to do some research on the gold-backed ETFs. Because in Australia, for example, there are a couple that track the gold price, so investors actually need to study the company and how they track the gold price.
And lastly, and probably quite common among Australian investors, is the gold mining shares. Gold mining shares track the gold price, but it's very important to understand it doesn't track the gold price one-to-one. So normally the share price of the gold mining stocks will be impacted by the gold price, production costs, the management style in terms of acquisitions and corporate governance. So that's something investors need to take into consideration.
A portfolio diversifier with staying power
Robin and the team have recently produced a whitepaper looking at the primary benefits and drawbacks gold may offer portfolios relative to other major asset classes over the long run. He also presents a case study to examine how including gold in a hypothetical multi-asset portfolio would impact its risk-return characteristics. You can read the report here.
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Ally Selby is the deputy managing editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian Group, Your Money, Sky Business and Sky News.
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Livewire gives readers access to information and educational content provided by financial services professionals and companies (“Livewire Contributors”). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.
State Street Global Advisors, Australia, Limited (AFSL Number 238276, ABN 42 003 914 225) (“SSGA Australia”). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: +612 9240-7600 · Web: ssga.com.
Investing involves risk including the risk of loss of principal. This material is general information only and does not take into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.
Investing in commodities entail significant risk and is not appropriate for all investors. Commodities investing entail significant risk as commodity prices can be extremely volatile due to wide range of factors. A few such factors include overall market movements, real or perceived inflationary trends, commodity index volatility, international, economic and political changes, change in interest and currency exchange rates.
The views expressed in this material are the views of Robin Tsui through the period ended 15 July 2024 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA Australia’s express written consent.
6805586.1.1.ANZ.RTL | Exp Date: 31/07/2025
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Ally Selby is the deputy managing editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian...
Expertise
Ally Selby is the deputy managing editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian...
Expertise
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