Jason Petras (Resonant Asset Management), Clive Maguchu (State Street Investment Management) and Marissa Salim (World Gold Council) discuss how investors can incorporate gold in a portfolio to improve its risk-return profile

Forget Australia’s first gold rush in the 1850s, there’s a modern-day gold rush happening right now. Over the last few weeks, people have queued for hours around gold bullion stores, intent on buying this precious metal.

Driven by global demand for safe-haven investments, continuing geopolitical tensions, the falling U.S. dollar, and a growing appetite by central banks to increase their gold reserves, the price of gold in Australia has hit record highs. Gold had risen from about US$2,800 an ounce in January 2025 to more than US$4,300 in October, continuing a 10-month surge that has gained the attention of Australian investors.

In setting the scene for gold, Marissa Salim — Senior Research Lead, APAC at the World Gold Council — says the global market value of gold currently sits at about US$23 trillion, which accounts for approximately 217,000 tonnes of this valuable commodity.

“Gold is a global market, with demand coming from all corners of the world,” says Marissa. “However, gold is increasingly becoming an Asia-Pacific story, with about 70 per cent of gold demand coming from emerging markets, with half of that demand sitting within China and the Indian sub-continent.”

As part of a panel discussion on gold at the IMAP Independent Thought 2025 conference, Marissa acknowledges that gold is an “interesting” asset class, due to its dual nature of being a consumer good (such as jewellery and used in technology), as well as an investment asset.

“Gold has maintained its strong year-to-date performance, reaching well over US$4,000 an ounce. In many parts of the world, including Australia, we’re also seeing gold lead many of the traditional asset classes in performance,” says Marissa. “Gold is used as a diversifier in a portfolio, because it’s negatively correlated with assets, like equities, in extreme market sell-offs.”

In explaining the demand for gold throughout 2025, Marissa points to three key areas:

1. As a safe-haven, due to geopolitical instability and the Trump tariffs;

2. Increased demand by central banks for gold, particularly in emerging markets; and

3. Demand for gold bars and coins in the Asia-Pacific region, which globally, accounts for over 60 per cent of this demand.

Typically, an exposure to gold can play a strategic role in a diversified multi-asset portfolio, given its potential as an inflation hedge, and its non-correlation to other assets, like equities. And while investors should be mindful of the metal’s notorious volatility, demand shifts (as outlined above) — particularly if they are sustained — could provide powerful tailwinds amid limited new supply.

According to Clive Maguchu, CFA — Senior Strategist, Investment Strategy and Research at State Street Investment Management — gold is a reasonably difficult asset for investment professionals to model in relation to forward-looking returns. As a result, Clive says allocators have traditionally avoided using gold when considering their strategic asset allocation (SAA), instead, using it as a tactical asset allocation (TAA) in portfolios, particularly during periods of market disruption and volatility.

“However, at State Street, we believe you can actually hold gold through multiple cycles, alongside other asset classes, like bonds and equities. We actually think gold stacks up well, perhaps too well, because when we do the modelling, a 10-20 per cent allocation to gold actually works quite well,” he says. “But in terms of a practical allocation for a retail investor’s portfolio, 2-5 per cent is the sweet spot for most multi-asset portfolios.”

Clive believes this type of allocation provides investors with the diversification benefits of holding gold, such as liquidity and the return on investment that gold generally provides.

For investors wanting to access gold, there has been a significant shift in how they can gain exposure to this commodity — from physical assets, like gold bars and coins, through to ETFs and managed funds.

“We’ve seen tremendous growth in the gold ETF space over the last couple of years,” says Clive. “By using products like ETFs and managed funds, investors can enjoy all the benefits of gold ownership, along with the transparency and liquidity that comes with these structures. Whether you’re using gold as a strategic or tactical asset class, we believe some of these financial products are better solutions for investors wanting to access gold.”

For its managed accounts, Resonant Asset Management approaches gold in a couple of different ways. From a total portfolio approach, Resonant looks at ETFs, managed funds, or specific stock selection of gold producers (like Newmont).

According to Jason Petras — Director Investments at Resonant Asset Management — one of the things Resonant has struggled with in terms of gold, is delivering yield in a defensive portfolio. However, by investing in mining stocks, like Newmont, investors generally receive a dividend, which they like. He believes that improving fundamentals for gold mining companies (such as global demand for gold) presents compelling opportunities for investors.

Traditionally, gold has been considered a defensive asset, but many asset allocators also view it as a growth asset. Jason acknowledges that as an asset class, gold can be “tricky” to classify, considering its defensive and growth characteristics, which can create issues in how advisers use gold within a portfolio. However, he adds that platforms and most investors categorise gold under the umbrella of alternatives, and “alternatives are generally considered growth”. 

Clive takes a different view: “I still believe gold provides better defensive characteristics in a portfolio than some of the other alternatives investors are turning to,” he says. “As a holding within a portfolio, gold does improve the risk-return profile of the portfolio.”

Clive believes it’s important not to focus on what the return profile of gold is at any given time. He says that’s because over the long-term, gold helps suppress the volatility of a portfolio, particularly during times of market stress.

“For that reason, I believe gold qualifies as a defensive allocation in a portfolio,” says Clive. “Often gold is used as a hedge to an investor’s equity holdings. We actually think gold acts as a hedge in a 60/40 or multi-asset portfolio, enabling investors to sell out of their equities or bonds when needed.”