For investors caught up in the buzz of identifying the next technology stock set to skyrocket, putting money in gold might seem an old fashioned, conservative idea.
Subscribe now for unlimited access.
or signup to continue reading
Yet the precious metal has recently fetched record prices, and some analysts say market forces mean there is plenty to like about its long term outlook.
Bell Potter Securities resources analyst David Coates is among them, explaining to novice investors the merits of having gold in a portfolio.
"The main reason to have exposure to gold is it's a long term store of value. I wouldn't necessarily recommend trading it, but the store of value is a good argument," he said.
Unlike some investment choices that can end in disaster, gold is bound to retain its worth.
"Many years ago an ounce of gold would have bought a fine suit of armour. Today, an ounce of gold (about US$2000) will buy you a fine suit. It does retain its purchasing power and is a global currency," Mr Coates said.
One of the easiest ways to buy gold is through exchange traded funds (ETFs) on the share market. These are a collection of assets that may include shares, commodities such as gold, and other assets.
People may also go to a gold bullion dealer and buy gold in its physical form, and buying gold coins from a mint is another option.
Commodities such as gold have limitations as investment types. Unlike some shares and property, commodities will not pay a regular dividend or rent. Investors could, however, buy shares in gold mining companies that pay dividends.
So what is the case for investing?
Investment analysts at Goldman Sachs recently put forward their view in an online article, tipping gold prices to rise six per cent over the next 12 months to US$2175 an ounce.
The analysts wrote that central banks, particularly China, had increased gold purchases since 2021 and driven up the price amid geopolitical crises such as the COVID-19 pandemic and Russia's invasion of Ukraine.
Consumer demand for gold jewellery in developing nations also contributed, the Goldman Sachs team wrote.
Another supporter of the precious metal was the head of commodity strategy for multinational broker Saxo, Ole Hansen, who says his team had a bullish outlook for gold.
Geopolitical tensions and the likelihood of US interest rate cuts were helping prices, Mr Hansen wrote this week.
As a non interest-bearing asset, gold tends to do better when interest rates are low. Mr Coates said investors had been positioning their gold investments with the expectation of lower rates.
Tribeca Investments portfolio manager Jun Bei Liu said the US election this year was another risk event that could help investors.
Not everyone agreed on the outlook, with Commodity Insights research and consulting director Matt Anderson saying gold was a commodity of last resort and for times of great uncertainty.
He said there was greater uncertainty about a couple of years ago after Russia invaded Ukraine, and China had threatened to take back Taiwan. Markets had largely adjusted, Mr Anderson said.
"I'm not excited about the gold price at the moment," he said. "Gold is one of those commodities you turn to when the s*** hits the fan."
The metal's record prices in recent months ($US2,083.40 on December 27 according to marketindex.com) have come from incremental increases.
That may not be as exciting as the surges of some technology stocks, but Mr Coates said he did not think the gold price records were the result of a bubble and it could be safer than other investments.
"If you look at the gold price charts, there hasn't been meteoric rises. The price has been consolidating around these levels. I think that's a positive."
"Gold has built a foundation to appreciate from when interest rates get cut.
"This is not like Bitcoin going from US$48,000 to $US60,000 in a couple of months. That's the sort of spike you want to be worried about."
Australian Associated Press
