4 factors that will see gold trading higher from here

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 

What has driven gold's performance over the last year? 

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.

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.

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.