The Case for Gold

Upbeat growth prospects for the global economy, led by the US are cause for optimism in the financial markets. However, challenges and risks prevail. As such, we believe that investors should look closely at the benefits gold can bring to their portfolios.

With the soft-landing narrative on the ascendancy, optimism is high within capital markets today. But challenges are on the horizon. As such, we believe that investors should look closely at the portfolio benefits gold can bring.

With the rapid growth in funding ratios over the past two years, an increasing number of UK defined benefit (DB) pension schemes have been contemplating their investment approach for the endgame – the point at which a plan moves from being underfunded to being fully funded or even having a surplus. This transition has a number of investment implications. In this paper, we examine how pension schemes can seek to maintain the ground they’ve gained over the recent past, as one of the driving forces behind the rise in interest rates and improved funding status – inflation – has become a source of asset price volatility.

The traditional Defined Contribution (DC) investment portfolio made up of equities and bonds has come under increasing pressure in the last 18 months. Faced with rising inflation volatility risks and a highly uncertain economic backdrop, could now be the time to reconsider traditional thinking? We believe investors would benefit from expanding their “safe havens” options by considering gold.

Gold, in Australian dollars (AUD), delivered positive returns in 2022 and this has continued so far in 2023. It has attracted attention: not only have global central banks continued to buy gold, but Australia’s sovereign wealth fund has also added gold to its portfolio.

Gold, in Australian dollars (AUD), delivered positive returns in 2022 and so far in 2023. And it has attracted attention: while global central banks bought a record level of gold in 2022, Australia’s sovereign wealth fund also added gold to its portfolio.

With the rapid growth in funding ratios over the past year, an increasing number of UK defined benefit (DB) pension schemes have been contemplating their investment approach for the endgame – the point at which a plan moves from being underfunded to being fully funded or even having a surplus.

While major Japanese and global assets have witnessed declines in H1, gold has delivered a 19% return in local currency amid a combination of rising inflation, geopolitical risks and a weaker yen.