Generally, gold is seen as a defensive asset; the commodity investors turn to when times get tough.
But lately, with interest rates low and inflation lagging, Shaw and Partners senior investment adviser Adam Dawes said gold has potentially taken “a bit of a backseat” and Bitcoin has a lot to answer for.
“I think people are now seeing Bitcoin — not just Bitcoin but all cryptocurrencies — as a store of value, which traditionally was something that gold would do,” he said.
“A lot of that money now has been moved into the crypto space. Plus gold is now traded by ETFs and that would have potentially created a liquidity event to start with, but now it has shaken-up the supply and demand of gold.
“It means that gold has become more of a speculative investment versus a store of value or a defensive asset.”
Nonetheless, there remains a place in any portfolio for gold. It is held by central banks, has a long history of being an investment grade product in the wider community and tends to perform well in a risk-off environment.
“Gold stocks are a buy,” Dawes said.
“Our analyst has recommended Northern Star (ASX:NST) and Newcrest (ASX:NCM) in the big space – he sees that they are oversold, and he can see that going forward, if some of these world events like inflation and interest rates start to rise, then it’s a good time to start looking at gold stocks for the future.”