“Over the last 12 months the average daily trading volume has been around $7 million, but it has been rising appreciably and peaked at a daily amount of $42 million on February 11,” he said.
“Since that time it has remained high and has settled around $17 million to $18 million a day since.
“The correlation between gold and equity markets is widening again as investors look to gold to provide insurance in people’s portfolios in times of uncertainty.”
Precious metals rising
ETF Securities is Australia’s second-oldest ETF provider and offered the world first physical gold product as an ETF.
And while Chugh acknowledges there aren’t exciting numbers associated with the value of gold, “not everyone wants excitement in times of turmoil”.
He says investors are looking at precious metal markets more closely, with silver, platinum and palladium also on the rise.
Investors are increasingly considering a basket of precious metals as a safe haven, he says.
Silver also has an industrial use, but people generally look to “palladium and platinum as an industrial exposure”, especially as Russia holds high supplies of both metals which are used in technology and automotive manufacturing.
With gold considered a safe defensive alternative investment, Chugh says some investors are starting to hold high single digits in the metal and some up to 15 per cent of their portfolio, whereas in the past most investors held about 2 per cent to 5 per cent.
Long-term goals
Cosmos Asset Management chief executive Dan Annan says geopolitical risk adds another layer of uncertainty to markets already reacting to an inflation spike and central banks relaxing their quantitative easing programs.
Investor interest in ETFs is on the rise because they offer diversification and hopefully minimise the “overall outcome risk in a portfolio”.
Annan says investors really need to think about asset allocation and their long-term goals.
For VanEck’s Asia Pacific chief executive Arian Neiron, the current climate will see a return to some fundamentals.
“We’ve had cheap and easy money for quite some time and now we’ll hopefully return to some form of normalcy with central banks tightening,” he says.
“Investors should look under the hood of what’s in their ETF or what their exposure is. If you are buying speculative tech companies or even crypto, you have to ask yourself, ‘is this going to survive a downturn?’
“Right now, it’s not about whether the investment presents a structural growth opportunity, but can the company survive if suddenly you pull the plug out of the bath.”
Neiron says VanEck is a “big believer in cryptocurrency, and we think it’s going to be a big thing”.
“We’re working closely with the ASX and we’re leading globally, and it represents a significant opportunity,” he says.
Chugh says ETF Securities is also looking at the potential of the crypto space and see it as a growth asset in the alternative asset class against its strong defensive presence with gold.
At Cosmos, which is Australia’s first crypto-focused ETF, Annan says the point of the product is to give investors access to the digital currency revolution and make it easy for them to gain exposure to products and trade them on a regulated platform, such as any of the exchanges that are available to them in Australia.
