Gold has long been a favoured investment for those seeking to diversify portfolios and hedge against economic uncertainties.
From traditional methods of gold investing to new trends such as gold-backed ETFs, we give you several different ways to take advantage of the gold bull run.
In 2024, gold prices experienced significant growth, rising from approximately $US2000 per ounce (oz) to nearly $US2800/oz, marking an increase of nearly 30 per cent.
This upward trend is expected to continue into 2025, with forecasts suggesting that gold prices could reach between $US2613 and $US3683/oz.
State Street Global Advisors said over the long term, gold stands out as a consistent source of portfolio diversification.
“Gold’s diverse, global demand among both cyclical and countercyclical sectors can help drive two key strategic benefits for portfolios: Its persistently low correlations to other asset classes and its ability to minimise tail risks,” State Street said.
“These characteristics may aid in providing efficient portfolio diversification while reducing portfolio drawdowns and volatility resulting in improved risk-adjusted portfolio performance.”
ETFs
Gold-backed ETFs offer a streamlined method for investors to gain exposure to gold’s potential appreciation.
Unlike physical gold holdings, such as bars and coins, ETFs provide liquidity through intraday trading on national exchanges and come with lower costs, including expense ratios and transaction fees, compared to storage and insurance costs associated with physical gold.
It’s crucial for investors to evaluate an ETF’s portfolio to determine how much is directly tied to physical gold, as some ETFs blend exposure to gold mining operations or related assets.
Holding physical gold involves significant premiums over spot prices and recurring costs for storage and insurance, which can erode returns.
Similarly, gold-managed funds offer daily liquidity but often fail to exclusively track gold prices, introducing portfolio complexities that could dilute exposure.
Gold mining stocks or mining-focused ETFs represent another option but differ markedly from direct bullion investments.
These instruments are influenced by operational profitability and industry dynamics, creating additional risks beyond gold price fluctuations.
For advanced investors, gold futures provide leverage but require sophisticated understanding and entail higher transaction costs due to contract rollovers and expiry management, with defined expiration dates requiring holders to roll over the contract according to a scheduled expiry to maintain their gold exposure.
Given the positive outlook for gold in 2025, investors seeking a blend of simplicity, liquidity, and cost efficiency may find gold-backed ETFs to be a compelling choice for diversifying portfolio exposure.
As always, due diligence is key when aligning investments with personal goals.
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