It’s elemental: This investment could add a little shine to your portfolio​on February 22, 2025 at 6:30 pm

• Gold’s allure: As mentioned, gold is viewed as a hedge against macroeconomic uncertainty, and is also an asset with minimal volatility itself, compared to say equities or newer age investments such as crypto. Gold, generally, also has an inverse correlation with interest rates, meaning when interest rates start to decline (as they have recently), the price of gold tends to increase. “Gold’s low correlation to risk assets, absence of third-party or geopolitical risks, and deep, liquid market make it a reliable investment, especially during times of uncertainty or crisis,” says Cameron Judd, gold fund portfolio manager at Victor Smorgon. Investors also aren’t just buying gold for its value – roughly half of global supply of the element is used in jewellery making, with another 10 per cent used for things like electronics and aerospace engineering.

• How it compares: Since 2000, gold has posted an annual average growth of 9.23 per cent, which is far ahead of bonds at 3.93 per cent, and even above something like the S&P 500 index, which has reported a total return (including dividends) of 7.69 per cent. However, this isn’t the full picture, as over a longer time-frame like 30-plus years, equities tend to perform better. Gold also doesn’t provide dividends like equities do, giving it less earning power as an investment, meaning it shouldn’t be the key growth asset in your portfolio.
• How much do you need? Given its lack of volatility and stability during times of uncertainty, gold is known as a defensive asset, and therefore shouldn’t comprise too much of your portfolio. Judd recommends an allocation of around 5 to 10 per cent.
• How do you get it? If you’ve been reading this and envisioning stacking towers of gold bullion away in a safe somewhere, I unfortunately have to (slightly) burst your bubble. While you can buy physical gold bars, and many people do, they can be impractical to store and often come with a mark-up representing the cost of smelting the bar itself. More common ways for investors to get exposure to gold is through gold exchange-traded funds (ETFs), and there are many on offer. Another option is to instead invest in ASX-listed companies that mine gold. Judd says many Australian gold miners are generating significant cash and have strong balance sheets, but their share prices don’t reflect this. “We believe gold miners represent the most compelling opportunity in the gold sector,” he says.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.