Investors' most common questions on gold, answered
In this episode of The Pitch, gold expert Robin Tsui from State Street Global Advisors answers investors most common questions on gold.
Gold prices, and gold mining stocks, have been on a tear over the last 12 months, with the price of bullion soaring more than 24%. ASX-listed gold stocks, of which there are 174 on the local bourse, have also had a fantastic year, with investors in smaller players like Spartan Resources (ASX: SPR), Perseus Mining (ASX: PRU), RED 5 (ASX: RED), Emerald Resources (ASX: EMR), Genesis Minerals (ASX: GMD), and Ramelius Resources (ASX: RMS), among others, making serious bank.
That said, not all gold miners delivered the same share price performance as the aforementioned names over the last 12 months. In fact, 126 of the 174 gold players on the ASX saw their share prices fall into the red over the year. That's more than 72%.
For investors looking for gold exposure without the volatility, gold-backed ETFs or physical gold itself may be a better choice.
So, to answer investors' most common questions on gold, Livewire sat down with State Street Global Advisors' gold expert, Robin Tsui, for everything investors need to know about gold.
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'll be answering investors' most common questions on gold, given its stellar out-performance over the last 12 months. And to do that, we're joined by State Street Global Advisors, Robin Tsui. Thank you so much for joining me today, Robin. It's awesome to feature you on the show.
Robin Tsui: It's a good question. Some of the questions probably divert to the price level, in terms of the outlook - where we expect the gold price is heading. I think it's quite common for an investor in gold to see if the gold price is going to go up or down. So that's the number one question we always get.
What are the main questions investors are asking you every day when it comes to gold?
The second question will be, how much gold to allocate to in a portfolio? From our research, we recommend about 2-5% allocation to gold in a portfolio, but it's very common for investors, ranging from retail and also institutional, to not know how much to invest. So a lot of time we have to share a lot of analysis, a lot of back-testing to ensure they're comfortable allocating a small allocation in gold.
And then the third question will be, what are the ways to invest, what's the best way to invest and the cheapest way? Is it physical gold, ETFs, or futures? So a lot of our time we have to go through the implications and also the considerations of using different gold-backed vehicles. So these three questions will be the most common I always get from investors in Asia.
What are your answers to those questions?
Robin Tsui: Depending on the investors' considerations and timeframe, I think each option has its merits and considerations. Obviously, gold-backed ETFs are very transparent. It's the cheapest way to invest, but there's a lot of research investors need to do as well.
Investors might prefer physical gold - they like to hold it, they like to see it, but the consideration will be where to hold or store the gold. For example, if you have gold that's worth $20 million, where are you going to put the gold? Is it at your home, at a store, at a vault? So that's some of the considerations investors need to think about.
In terms of allocations, we have clients that range from 1% to 30%, but from our perspective, based on our research, a strategic allocation of 2-5% is probably sufficient. Over 5% is probably for those very technical investors. They believe the gold price will spike, let's say 10% in the next three months.
In terms of the price range in US dollars, we probably expect gold prices to trade between US$2,200 and US$2,500 in the next six months. That's because we do believe there are very strong drivers supporting gold prices at this current moment, including strong central bank buying, and strong investor demand, and also, we probably expect some kind of risk heading into the US elections that will increase the market volatility in the next six months.
We actually have a bull case as well. We expect gold prices can trade somewhere between US$2,500 and US$2,700. To achieve that target, we need some sort of rise in geopolitical risk and rise in tensions around the world that will spur a lot of safe-haven buying into gold.
What's the biggest mistake you see investors making when it comes to investing in gold?
Robin Tsui: I wouldn't call it a mistake, but some of the considerations they may have is that they look at gold as one asset class. So they chase the returns and if gold doesn't achieve the targeted returns, they sell the gold. But gold should be viewed as a component in a portfolio, and how it reacts with other asset classes, because ultimately that's why institutional investors and central banks buy gold - because it can provide a potential hedge or diversification because of its historically low correlations to stocks and bonds. So I think the biggest mistake is to look at gold as a single asset class, rather than how it reacts or interacts with other asset classes that you may have.
Are there any risks that investors should be aware of when investing in gold?
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.
Diversification does not ensure a profit or guarantee against loss.
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.
Assets may be considered “safe havens” based on investor perception that an asset’s value will hold steady or climb even as the value of other investments drops during times of economic stress. Perceived safe-haven assets are not guaranteed to maintain value at any time.
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.
6805590.1.1.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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