In 2023, the demand for gold surged to unprecedented levels, driven by a 13% increase in prices amidst global economic and geopolitical uncertainties. Key drivers behind this upward trend included robust demand from China, substantial purchases by central banks, and a strategic move to hedge against inflated valuations in the US stock market.
A recent survey conducted by State Street Global Advisors and the World Gold Council revealed that 24% of asset owners in the Asia Pacific region do not currently hold any gold investments, mirroring the figure among North American investors. Looking ahead, however, there is a notable divergence in sentiment: 27% of Asia Pacific asset owners anticipate increasing their gold investments over the next 12 to 18 months, compared to 21% of their North American counterparts, according to Robin Tsui, Apac gold strategist at State Street Global Advisors.
Tsui emphasized, “Our survey indicates a growing trend among Asia Pacific asset owners who view gold as a cornerstone for long-term investment strategies, particularly in well-balanced, diversified portfolios.”
The survey, encompassing insights from 850 consultants, financial advisors, and institutions globally, including 63 asset owners in Asia Pacific, highlighted varying levels of gold exposure among investors in the region. Beyond the 24% without any gold exposure, findings revealed that 22% allocate between 0.1% and 0.9% of their assets to gold, while 46% allocate between 1% and 4.9%, and 8% allocate 5% or more.
The top reasons cited by Asia Pacific asset owners for investing in gold or increasing their exposure included its role as a proven diversifier during financial turmoil and economic uncertainty (59%), its ability to enhance risk-adjusted returns over time (37%), and its effectiveness as a hedge against a weakening US dollar (37%).
John Reade, chief market strategist for Europe and Asia at the World Gold Council, affirmed, “Gold’s established role as a diversifier, particularly during periods of economic uncertainty, remains the primary motivation for Asia Pacific asset owners.”
Reade added, “Gold has consistently demonstrated low or negative correlations with many financial indices over time, offering a reliable hedge during market downturns, systemic risks, and geopolitical instability.”
Despite its benefits, reluctance to invest in gold persists among some investors, citing reasons such as its lack of coupon or dividend payments (59%), challenges in determining its intrinsic value due to the absence of a standardized model (37%), and fluctuations in the US dollar’s strength affecting its attractiveness (25%).
Looking forward, Reade noted, “With expectations of potential Federal Reserve policy easing in 2024 and an upcoming contentious US presidential election, the case for heightened gold demand in the near future appears compelling.”
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