HEAD-TO-HEAD: Jupiter versus Ninety One

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Darius McDermott, Chelsea Financial Services

Introduction

Gold is an effective portfolio diversifier, helping investors capture some of the upside as economies recover, but most importantly protecting the downside. This behaviour is underpinned by gold’s dual nature: both as an investment and as a consumer good.

In fact, as John Reade, chief market strategist at the World Gold Council, points out, more than 40% of net annual gold demand is linked to primarily jewellery and electronics, and thus positively linked to economic expansion.

Conversely, investment demand-which also accounts for more than 40% of net annual demand tends to be countercyclical and protect portfolios in periods of economic uncertainty.

According to Reade, there are four drivers of gold’s performance: economic expansion, uncertainty, opportunity cost, and momentum.

Gold can be quite sensitive in the short term to the direction of interest rates and the overall direction of monetary policy. While interest rates are expected to remain low for some time, tighter monetary policy whether through higher rates or lower asset purchases will likely create headwinds for gold.

“In the end, the magnitude of these headwinds will depend on how other variables such as inflation concerns or currency debasements impact investor decisions,” said Reade.

Against this background, FSA asked Darius McDermott, managing director, Chelsea Financial Services, to select two gold products for comparison: the JGF-Jupiter Gold and Silver Fund and the Ninety One Global Gold Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 25 June 2021)

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