Many in retirement are travelling comfortably, with three key factors contributing to their happiness – good physical and mental health and enough money to enjoy life.
Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Gold bugs light up as Trump rattles debt, equity markets
It’s a telling statistic. When Donald Trump was elected to the White House on November 5, 2024, gold was trading at $US2,918 ($AU4,576) an oz. At the close of US trading on Tuesday, it stood at $US3,380 ($AU5,305) – a 16 per cent gain. Right now, it’s an investment with the golden touch, so it’s no surprise it’s getting the attention of self-funded retirees increasingly unnerved by volatile bond and equity markets.
If these investors needed any more convincing of gold’s safe-haven status, trading activity in March alone would have provided it. With Trump’s on-again, off-again tariffs rattling global debt and equity markets, it rose 9.9 per cent. As the World Gold Council (WGC) said in its March report, even a materially weaker US dollar, primarily via Euro strength, couldn’t prevent gold’s “stellar performance” and highs across all other major currencies.
“Euro strength and thus US dollar weakness was once again a key driver of gold’s performance, alongside an increase in geopolitical risk capturing tariff fears,” the report said. “Gold ETF buying continued apace with all regions contributing. And US funds led the charge with $US6 billion ($AU9.4 billion) in net inflows, followed by Europe and Asia with about $US1 billion ($AU1.6 billion) apiece.”
Marc Jocum, Global X ETFs senior product and investment strategist, commenting when gold breached $US3,200 ($AU5,000) just two weeks ago, noted how investors were selling US Treasuries “as they may be losing their safe-haven status despite plunging equities”.
In one day (April 9), more than $AU1.6 billion was traded in Australian-listed ETFs, exceeding the daily average of around $AU900,000 and the fifth consecutive day with ETF trading volumes exceeding $AU1 billion.
“We expect investors to continue buying up gold ETFs, with the precious metal striking a fresh high and as global investors turn away from US Treasuries as a safe-haven asset, in what could well be called the ‘Global Trump Dump’.
“Gold now is the premier safe-haven asset and the latest tariffs from Trump have boosted demand. With heightened uncertainty and significant swings in global bond markets, investors are diversifying into gold as an alternative store of value. Gold could experience record-breaking inflows this month on the back of rapidly rising retail demand.”
While the positive note on gold from the WGC and Global X ETFs comes with the caveat both have a vested interest, what’s interesting is how gold is sparking the interest of financial advisers – and their clients – in the current market volatility.
Grame Bibby, Partners Wealth Group (PWG) chief investment officer, says gold hasn’t formed part of its separately managed account models to date, but individual investors could consider it.
It’s a different story in the family office, multi-family office and ultra-net-wealth advice space, he says.
“I was able to have a small allocation approved within a multi-family office model portfolio as most of the client base was able to take a less constrained view of asset allocation. In the current environment and for the past few years since COVID, there has been a shift to gold as concerns about inflation and debasement of traditional paper currencies has taken hold.”
But he adds a note of caution. “I would say that investing now at the peak of interest and momentum is not unusual for investors who follow headlines. Our investment philosophy is cognisant of the market cycle of investments. So, with gold we would prefer to see a better medium-term price level.”
Rohan Serrao, PWG senior investment adviser, adds there’s increased interest in gold from clients, notably as a hedge in uncertain, unnerving geopolitical times, as much as an inflation hedge.
No different to Bibby, he urges caution. “I don’t believe that the ‘average’ client, whether less and more sophisticated, understands the idiosyncrasies of investing in gold, and, as Graeme (Bibby) alludes to, times like these where ‘mums and dads’ are showing increased interest in an asset class or investment type have – more often than not – signalled a market top, even if only temporarily.”
Hugh Robertson, Centaur Financial Services managing director, says gold is a safe-haven asset at a time when bond yields are experiencing volatility due to the “tariff tantrum”.
For investors, he recommends ETFs or even ASX-listed gold stocks. “My preference is via gold ETFs. Although they don’t provide income, they can preserve value in your portfolio during these turbulent times. If you do need income from a gold exposure, look for miners paying dividends.”
The Melbourne-based advice firm Wattle Partners have been gold bugs for nearly a decade, says partner Drew Meredith.
“We have been long-term proponents of gold bullion, having recommended it to clients since 2018 or even earlier, when the price was as low as $AU1,600. [For those very early birds, it’s been a 200 per cent plus gain.]
“We aren’t surprised by the growing popularity of the asset, but naturally warn against simply jumping on to the latest, top-performing investment as is all too often the case.”
He says that for gold to offer a true hedge within portfolios, it must be held at a material level, and a major decision must be made around currency – both hedged and unhedged options are available – considering a relatively weak Australian dollar.
“Every client we work with has gold in their portfolio. So, few clients are looking to buy, and in some cases looking to take profits given the exceptional performance.
“Interestingly, our biggest challenge when recommending gold was educating advisers and investors about its merits. Traditional financial advisers tend to be concerned by the fact that it ‘does not provide an income’ and hence aren’t comfortable holding it in most portfolios, as was the case in our business for some time. It’s a similar story for retail investors who can’t look beyond the obsession with income, despite clear hedging benefits.”
