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Invest

Gold shines in economic ‘perfect storm’

By Grace Ormsby · September 13 2019
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Invest

Gold shines in economic ‘perfect storm’

By Grace Ormsby
September 13 2019
Reading:
egg
egg
Gold

Gold shines in economic ‘perfect storm’

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By Grace Ormsby · September 13 2019
Reading:
egg
egg
Gold

Incorporating gold into an investment portfolio is a very sensible approach to combatting global instability, according to the CEO of an Australian ETF provider.

nestegg spoke with Alex Vynokur of BetaShares about the resurgence of gold as an attractive option for investment the world over.

Considering escalation of trade wars and global uncertainty due to weakening economies has seen people “looking for safety”, which is, in turn, providing significant opportunities for gold, the CEO outlined.

He also highlighted the “very, very unusual set of circumstances” where so much of the global debt is becoming negative yielding.

It’s creating “what really is the perfect storm for gold and for gold mining companies”.

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On the one hand, Mr Vynokur said people are buying gold as a “safe haven asset to protect against uncertainty around the world and a slowdown in the global growth”.

“At the same time, just given that negative interest rate environment… gold is actually, on the relative basis, a more attractive investment – you know, because you don’t have the negative interest rate associated with holding gold,” he continued.

Calling gold “a shining part of many people’s portfolios – no pun intended”, the CEO outlined how most significant institutional investors around the world will have a permanent allocation of gold in their portfolios.

With some arguing for five to 10 per cent allocation at any given time, Mr Vynokur said a number of investors are now tactically increasing that allocation to gold “because [of] the opportunity cost of holding gold”.

He also highlighted gold’s ability to be used “as an effective insurance policy against some of the economic instability that we are witnessing”.

“An allocation to gold is a very sensible approach, and a significant number of institutional investors and retail investors around the world are doing so,” he outlined.

Hailing from the world of ETFs, and with BetaShares having its own offerings, Mr Vynokur is quick to applaud his gold-based ETF, which “benefits from the fact that it is trading on the exchange, so people can buy and sell at any time”.

But for those who want to go down the path of buying physical gold coins, bullion or bars, the CEO did emphasise that investors should understand “what exactly they are buying” and be cautious about making sure “that they are buying the real thing”.

He also flagged the importance of investors being mindful of possible transaction costs and the cost of storage, as “sometimes the transaction costs or the storage costs could be pretty high, and the liquidity of the investment may not be that great”.

Gold shines in economic ‘perfect storm’
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About the author

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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About the author

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

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