Gold Shines as Best Hedge Against Global Banking Crisis, Says Top Australian Fund Manager

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David Franklyn, the Head of Funds Management at Argonaut Resources, said gold remains the best hedge against the global banking crisis escalation as uncertainty around the global economy’s health increases.

Despite a challenging quarter for the resources sector, falling 6.5% in US dollar terms, gold prices surged 7.3% in response to financial stability risks mounting on the failure of Silicon Valley Bank (SVB) in the US. Spot gold was trading at $US2043.03 ($3014.23) an ounce last week.

Franklyn, who manages the top-performing fund in Australia, cited the collapse of Silicon Valley Bank and the subsequent forced takeover of Credit Suisse by UBS as underwriting the appeal of gold.

“We had a big exposure to gold, and gold is still looking pretty good,” Mr Franklyn said. “It’s been solid over the last year – and, with the geopolitical situation, I think it’ll continue.”

Gold Exchange Traded Funds

The fund manager believes that investing in gold stocks has served his company well, with Argonaut Resources topping the table with a 41.5% return since inception, or 3.1% for the year to March 31.

He has identified three key drivers behind the strong performance of gold, which include the increased demand for jewellery from Europe and China, the growing number of central banks purchasing gold, and the quick turnaround of gold exchange-traded funds.

“They’ve been in net outflows for the last four months. And that’s just in March switched around the other way with inflows,” he said. “We think there’s good dynamics around gold and gold companies. The margins will be improving with costs and gold prices going up.” 

As gold exchange-traded funds experience a quick turnaround in their performance, Franklyn believes there are good dynamics around gold and gold companies, with margins set to improve as costs decrease and gold prices continue to rise.

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