A golden track record in times of crisis: ETFS

Gold has maintained its status as a “core diversifier” and “insurance overlay” despite current geopolitical tensions and resulting humanitarian crises causing market volatility, according to ETF Securities.

The asset manager’s Head of Distribution, Kanish Chugh, said gold is one of the only assets with a proven reputation of long-term performance during times of crisis and still provides comfort to investors amid uncertainty.

“This truism has been borne out yet again with the recent improvement in the gold price which had come off a recent high of $US2000 an ounce in February/March following the Russian invasion,” he said.

“Gold has turned the corner in recent weeks and has now traded flat year to date.

“Geopolitical tensions remain high, with war in Ukraine destabilising eastern Europe and Nancy Pelosi’s visit to Taiwan causing alarm in China. While these events are reflected in the gold price at this stage, they serve as a reminder that gold typically finds support during times of crisis.”

ETF Securities also noted gold had outperformed other asset classes and indexes alongside the highs of inflation, including MSCI World, ASX 200, Australian bonds and global bonds.

“Signals also suggest that the dollar’s strength may be waning. US Fed funds rate futures have become less hawkishly priced in recent weeks, as fears of slowing US growth raise questions about the Federal Reserve’s ability to continue tightening,” Chugh said.

“Fed rate hikes are one of the primary determinants of the value of the US dollar. Should the dollar retreat, we could see further support for gold.”