ASX gold exchange-traded funds (ETFs) like the Global X Physical Gold ETF (ASX: GOLD) seem to be the talk of the ASX town this week.
Gold is a rather peculiar asset to invest in. Unlike ASX shares, you can buy and sell gold outside the ASX by just going to a bullion shop. Or a jeweller.
But there are many ways to invest in gold on the ASX too. There are gold miners, of course. The ASX has quite a few, such as Newcrest Mining Ltd (ASX: NCM) and Northern Star Resources Ltd (ASX: NST). But there are also gold ETFs to consider.
Take the Global X Physical Gold ETF. This fund, according to the provider, is backed by physical gold bullion. This bullion, in the form of "segregated, individually identified and allocated" bars, is held in a London vault. As such, an investment into the Global X Physical Gold ETF is an indirect investment in these gold bars.
If investors don't want to store physical gold bullion in their homes, then an ETF like this is a viable alternative for any investor seeking exposure to gold.
But why gold in this day and age?
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Why is gold all the rage right now?
Well, gold is an asset that is traditionally viewed as a hedge against inflation, economic uncertainty and financial instability. With rising interest rates, high inflation, the ongoing war in Ukraine and a possible recession next year, investors might be a bit nervous going into 2023.
The Future Fund certainly is. Australia's sovereign wealth fund warned investors in its last portfolio update that it would be positioning its investment portfolio:
Looking ahead, key issues will be the extent of monetary policy tightening required to achieve inflation targets, how markets will respond to tightening measures, and the impact of fiscal policy measures on global financial systems. Ongoing geopolitical tensions also continue to pose risks to investors.
The Board continues to take a prudent approach to positioning the portfolio. We are focused on sustaining a portfolio that is as robust as possible to a range of scenarios, and that balances our risk and return objectives. We expect that real returns will continue to be much lower than in recent decades.
According to recent reporting in The Australian, this includes investing in gold. The Future Fund reportedly began buying exposure to the precious metal in 2020.
Today, Future Fund chief executive Raphael Arndt told The Australian that the Fund is holding "a few percent" in gold, a stake that probably did the fund well in 2022.
This year has been a dire one for most major asset classes. The S&P/ASX 200 Index (ASX: XJO) remains down by more than 6.5% year to date. The US S&P 500 Index has fared even worse, copping a fall of more than 20%. Property and bonds have also been general money losers.
And yet the Global X Physical Gold ETF is up more than 6% this year so far, proving the value of owning gold for a risk-averse portfolio like the Future Fund.
