Gold & Precious Metals and the Asian Private Client – A Hubbis Digital Dialogue Event

Hubbis, Wednesday,  4th January, 2023

As we turn the corner into 2023, replete with its numerous uncertainties and concerns, should private investors be stocking up on gold and possibly other precious metals? And if so, how? Physical gold? Actively managed funds, or ETFs? What are the risks and potential rewards? The Hubbis Digital Dialogue of December 8 saw a small panel of erudite private bankers and gold specialists mine down into some rich seams of insights and observations.

The Panel:

  • Davis Hall, Head of Capital Markets, Asia, Indosuez Wealth Management
  • Joshua Rotbart, Managing Partner, J. Rotbart & Co.
  • Manpreet Gill, CIO – UAE, Standard Chartered Bank

 

Setting the Scene

It was in late 2020 when Hubbis last conducted a major survey of over 100 experts in Asia’s wealth management markets, asking them how they were helping position client portfolios for the potential arrival of inflation. At the time, there were gradually growing concerns that, despite the bullishness of investors after the big sell-off caused by the early days of the pandemic, the era of a rising tide of money lifting most mainstream asset valuations worldwide was inevitably going to give way to a new era requiring greater selectivity, deeper analysis, and far more caution.

That tide did, however, keep rising for asset prices throughout 2021, more aggressively and with greater liquidity than most had anticipated. But then the inevitable happened – inflation and higher interest rates arrived and, as we can now see, with far greater force and impact than many had expected; far greater volatility struck, asset prices slumped, and geopolitical worries turbocharged anxiety, dragging asset prices and markets down further and harder than many might have expected. The leading central banks of the world have since made beating back inflation their primary target, at the risk of triggering or exacerbating oncoming recessions.  

Meanwhile, the US dollar has maintained its strength, rising against virtually all currencies since 2021, except the ever-mighty Swiss franc. Bitcoin, which many had promoted as being effectively digital gold and therefore a hedge against inflation, has slumped nearly 75% from its October 2021 all-time high (although it is still more than 200% higher than its price in March 2020 during the early weeks and fears of the pandemic).

 

So, what does all this mean for gold, which hit an all-time high of about USD2069 in August 2020 but which on December 8 was trading at USD1787, in other words down nearly 14% from that historical high.

Some argue that more than inflation or risk aversion, real (or net-of-inflation) bond yields remain the most important driver of gold prices. This, they argue, means real yields could be a headwind for gold in early 2023 as inflation slows a little before interest rates, so will an eventual turn lower in both inflation and interest rates ten support gold later into 2023?

On December 8, Hubbis assembled a group of precious metals and wealth management experts to answer this and many other key questions, looking at the gold and precious metals markets from the perspectives of the wealth management community (the private banks, EAMS, MFOs, SFOs) and the private investors. They sought to determine their attitudes and approaches and indeed how investment is taking place, such as into physical gold or gold-related stocks or actively managed funds, or ETFs. Regarding physical gold or other precious metals, they also debated how the wealth managers can work with specialist firms to acquire, trade, and also store and insure these precious assets. 

 

These are some of the questions the panel  addressed:

  • Is your bank or wealth firm advising private clients to increase or decrease their portfolio allocation to gold? Why or why not?
  • Is your bank or wealth firm advising private clients to increase or decrease their portfolio allocation to other precious metals? Which ones and why?
  • What is your bank or firm’s expectations for gold prices in the year ahead, and why?
  • How should investors gain access to gold? Physical gold? Stocks? Active funds? ETFs? And why?
  • Does your bank or firm advise on investing and holding physical gold, and do you work with specialist firms that can hold gold and transport and report on gold securely?
  • What sort of allocation should wealthy private investors have to gold and/or other precious metals in their total portfolios, and why?

The Hubbis Post-Event Survey

What are the key asset classes you are advising your clients in Asia to invest in currently?          

Equities                                                     30%

Bonds                                                        27%

Gold & Other Precious metals                  15%

Currencies                                                 8%

Commodities                                             15%

Real estate                                                  5%

             

How would you characterise demand for gold amongst your private clients in Asia?    

Very strong demand                                               8%

Modest demand                                                     80%

Low demand/little interest                                    12%

             

How would you characterise demand for other precious metals (aside from gold) amongst your clients in Asia? 

Very strong demand                                               8%

Modest demand                                                     46%

Low demand/little interest                                    46%

             

How are your clients taking their exposure to gold?              

Physical gold                                                           30%

Selected gold mining or other stocks                      12%

Actively managed funds                                          15%

ETFs                                                                         43%

             

What do you or your bank/firm anticipate for the price of gold by the end of 2023?

US$1250                                       8%

US$1500                                       11%

US$1750                                       35%

US$2000                                       35%

US$2250 and above                      11%

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