Gold shines as source of resilience in uncertain markets

A broader and more agile approach to portfolio strategy is shaping asset allocation in today’s dynamic world.

The looming threats of wild market swings and heightened geopolitical risk, coupled with pending rate cuts and the US election later in the year, have sharpened investors’ focus on protecting their returns as far as possible while also staying diversified.

Reflecting this sentiment, demand among investors in Hong Kong and Singapore for safe-haven assets such as gold has soared.

These were among the takeaways from a recent webinar, hosted by AsianInvestor and State Street Global Advisors, on rethinking and diversifying portfolios in uncertain markets, based on the views of several market specialists:

• Michael Preiss, Partner & Portfolio Strategist, Das Family Office
• Karen Tan, Head of Managed Solutions, Asia, Pictet Wealth Management
• Zhenghao Phua, Head of Asset Allocation, Income Insurance
• Robin Tsui, APAC Gold Strategist, State Street Global Advisors

KEY INSIGHTS - “Rethinking portfolios for a new era: Diversifying in uncertain markets”

Adapting allocations to tackle challenging markets

Michael Preiss
“It's very important to broaden portfolios. A key focus in the global market is the outperformance of the US market and avoiding crowded trades. Other markets around the world which have underperformed the US in recent years are now starting to outperform.”

Karen Tan
“The sell-off in early August illustrated how quickly things can turn. But market corrections are a natural part of the investment cycle. So, staying invested is important. We strongly advocate active management to diversification and solid risk management practices to navigate volatility, protect portfolio performance and generate alpha.”

Robin Tsui
“In the last couple of months, looming rate cuts and also the US election are key events investors are watching. In response to this, we are seeing more inquiries about gold and some of the defensive sectors. Investors are also trending towards a broader base in equities.”

Zhenghao Phua
“We have been in the “soft landing” camp like most investors, favouring equities over bonds since the latter half of 2023. We remain overweight equities, however, we moderated our equity overweight coming into August given weakening economic data and a seasonally challenging period for equities. As the debate among investors shifts from stagflation risk to recession risk, we think the risk/reward has been good to long duration as bond investors tend to be earlier in pricing any possible deflationary outcomes than equity investors.”

Trends in ETF flows to date in 2024

Robin Tsui
“The first half of the year turned out to be very different from what we’ve seen since mid-2024. In the first six months, a lot of the flows went into the technology and energy sectors. What has changed in the last couple months, is greater interest and more flows selectively into defensive sectors, including consumer staples, utilities and also gold.”

“As investors now look for safe haven assets, gold has been one of the top selling products since the middle of the year. Short-term treasuries are coming back into favour as well, given the rise in expected rates volatility in the coming months.”

Rising gold allocations

Robin Tsui
“The gold market is going through a structural change where central banks and investors are paying more attention to gold as an asset class, given it has low correlations to stocks and bonds. We also expect a higher VIX to continue, and to support gold prices. Even though the gold price is hitting record highs, we're still seeing very strong demand through ETFs.”

Zhenghao Phua
“It is generally accepted that risk and uncertainty often boost investment demand for gold as a safe haven asset. There has also been an additional driver from central banks likely to accelerate their gold position to diversify away from potential geopolitical and hedge US sanction risks.”

Karen Tan
“We have seen investors look at how they can better protect their portfolio returns against the drawdowns that happen when we see events like in early August. We are extending allocations to safe haven assets like gold and US Treasuries, and also looking for alternatives that are less correlated to the market indices. Our global investment committee continues to like gold as a portfolio hedge against geopolitical risk.”

Outlook for gold amid a rate-cutting cycle

Robin Tsui
“While gold has hit multi-decade highs, rate cuts of a few basis points shouldn’t change the fundamentals. In the last two years, gold has outperformed investors’ expectations. Despite the high interest rate environment, it was up over 13% last year and more than 20% year-to-date.”

Zhenghao Phua
“On a tactical basis, the pivot of many central banks towards rate cuts, along with expectations of a weaker US dollar and positive price momentum, will support the yellow metal in the near term. Gold versus the US 10-year yield (inverted) has been moving in close tandem over the past few months.”

Robin Tsui
“In terms of our price expectations, our bull market case is for the gold price to trade within $2,500 to $2,700 by the end of the year.”

Zhenghao Phua
“Gold can be good tail risk or stagflation hedge, but we need more evidence of sustained stagflation environment and agreement on expected returns framework, so that this asset which yields no cashflow features well relative to other asset classes. In the meantime, an overweight tilt towards the gold mining sector seems attractive given valuations relative to broad equities and the physical gold price.”

Investment opportunities to watch

Michael Preiss
“I think efforts by some Asian markets like Singapore and South Korea to make their stock exchanges more attractive to global investors versus US stocks is under-appreciated. This is a growing trend we see around the world, with more and more investors coming back to their own domestic markets, potentially even with a value investing approach.”

Karen Tan
“Dividends are interesting as these stocks offer steady growth and also a cushion against rocky markets. Dividends have been very resilient – since the 1930s, they have accounted for nearly 40% of total stock returns and have been resilient during market corrections.”

Robin Tsui
“Investors who want to hedge against inflation and market risk should consider a strategic allocation to both gold and commodities, including oil and copper.”

For more information on gold, contact State Street Global Advisors Singapore or State Street Global Advisors Hong Kong.

_{Important Risk Disclosures}

_{For Investment Professionals Use Only}

_{This article is provided for informational purposes only and should not be considered investment advice or an offer for a particular security or securities. The views and opinions expressed by the speaker are those of his or her own as of the date of the recording, and do not necessarily represent the views of State Street or its affiliates. Any such views are subject to change at any time based upon market or other conditions and State Street disclaims any responsibility to update such views. These views should not be relied on as investment advice, and because investment decisions are based on numerous factors, may not be relied on as an indication of trading intent on behalf of State Street. Neither State Street nor the speaker can be held responsible for any direct or incidental loss incurred by applying any of the information offered. Please consult your tax or financial advisor for additional information concerning your specific situation. This article cannot be used for commercial purposes, and should only be used in the specific countries as restrictions exist with some products and services marketed globally.}

_{All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should be relied on as such.}

_{The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.}

_{The views expressed in this article are the views of the SPDR Gold Strategy Team through the period ended 30 June 2024 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.}

_{The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA's express written consent.}

_{Diversification does not ensure a profit or guarantee against loss. Investing involves risk including the risk of loss principal.}

_{All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone.}

_{The World Gold Council name and logo are a registered trademark and used with the permission of the World Gold Council pursuant to a license agreement. The World Gold Council is not responsible for the content of and is not liable for the use of or reliance on, this material. World Gold Council is an affiliate of the Sponsor of SPDR® Gold Trust.}

_{Investing in commodities entail significant risk and is not appropriate for all investors.}

_{Commodities investing entail significant risk as commodity prices can be extremely volatile due to wide range of factors. A few such factors include overall market movements, real or perceived inflationary trends, commodity index volatility, international, economic and political changes, change in interest and currency exchange rates.}

_{Assets may be considered "safe havens" based on investor perception that an asset's value will hold steady or climb even as the value of other investments drops during times of economic stress. Perceived safe-haven assets are not guaranteed to maintain value at any time.
There are risks associated with investing in Real Assets and the Real Assets sector, including real estate, precious metals and natural resources. Investments can be significantly affected by events relating to these industries.}

_{The S&P 500® Index is a product of S&P Dow Jones Indices LLC or its affiliates (“S&P DJI”) and have been licensed for use by State Street Global Advisors.  S&P®, SPDR®, S&P 500®,US 500 and the 500 are trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and has been licensed for use by S&P Dow Jones Indices; and these trademarks have been licensed for use by S&P DJI and sublicensed for certain purposes by State Street Global Advisors. The fund is not sponsored, endorsed, sold or promoted by S&P DJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of these indices.}

_{The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.}

_{Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200.}

_{Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). Telephone: +65 6826-7555. Facsimile: +65 6826-7501.}

_{Tracking Code: 6990036.1.1.APAC.INST
Expiration Date: 31 August 2025}