HEAD-TO-HEAD: SSGA vs Value Partners
By Kate Lin, 23 Feb 18
FSA compares the strategy of two exchange-traded funds: the SSGA SPDR Gold Shares ETF and the SAM Value Gold ETF, which are the only physical gold passive funds available for sale in Hong Kong.
Pictured above: Luke Ng, FE Advisory Asia
Gold is a precious metal traditionally considered as an investment safehaven. This is why most of the time gold becomes relatively popular when a major currency depreciates, said Luke Ng, senior VP of research at FE Advisory Asia.
As an investment, the disadvantage of gold is that it does not create any yield like equity, bond or even bank savings. But when there is a market rout, gold is typically a place where investors prefer to park their cash, he noted.
However, amid the stock market correction early this month, there was not a massive amount of money flowing into gold financial products. “The market correction in February was rather short-term so most investors were not compelled to move into gold,” he added.
In terms of outlook, Ned Naylor-Leyland, fund manager of the Old Mutual Gold and Silver Fund, said gold is expected to enter a bull cycle for at least three years due to the effects of interest rate hikes and inflation expectations.
He said gold has currently priced-in an expectation of four interest rate increases for the full year 2018. Therefore, if the US Federal Reserve raises the rate four times or less, gold is expected to move higher.
“Any geopolitical turbulence, no matter whether it’s from North Korea or Iran, might hold back one or two interest rate increases, which would benefit the gold price as well,” he added.
In manufacturing, gold has only a limited role, for example in the production of mobile phone hardware, Ng said.
However, there is strong demand from the world’s two largest buyers of the metal – India and China – because gold has a traditional role in those countries where it is commonly used for personal savings and in weddings for decorative accessories, Ng said.
Against this backdrop, FSA compares the strategy of two exchange-traded funds: the State Street Global Advisor’s SPDR Gold Shares ETF and the SAM Value Gold ETF.
|SPDR Gold Shares||Value Gold|
|18 November 2004||29 October 2010|
Total gold in trust (kg)