I’ve had a few clients recently ask about gold or mention the news articles showing people lining up to buy a physical bar. There’s no doubt the past few years have seen strong demand for the precious metal.
The graph below shows how $10,000 invested in Australian-dollar gold (black dotted line) compares with $10,000 in Australian shares (green line, represented by an ASX 200 tracking ETF).
Gold is typically viewed as a hedge against market volatility. When shares fall, gold often rises, as seen during the Global Financial Crisis (2008–2009) and again in 2020 during the COVID downturn. Since 2023, gold has appreciated sharply, driven by geopolitical tensions, political instability, increased central bank reserves, and strong investor demand.
With prices soaring, the question naturally arises: Should you be investing in gold?
When I see a graph like this, I tend to view it as showing an extreme deviation from an asset’s long-term trend. Historically, such moves are often followed by a reversion toward average long-term returns. After such a sharp price increase, it may suggest that the easy profits have already been made.
Gold can offer a sense of security and may suit a portfolio depending on other assets held and a client’s objectives, but I generally don’t recommend gold unless it’s specifically requested.
To put the current interest in perspective, the table below compares returns for the ASX 200 ETF, gold in Australian dollars, and several of Australia’s largest companies, including BHP, Wesfarmers, Telstra, Goodman, CBA, Rio Tinto, and CSL – over 1, 3, 5, 7, 10, and 15 years to 30 September 2025.
The following table shows how different things looked just two years earlier, at 30 September 2023, before the recent gold price spike.
In summary, holding gold bars might make for interesting BBQ conversation, but over the medium to longer term, many other investments have delivered stronger and more consistent returns.
If you’d like to include physical gold or gain exposure through gold miners within your portfolio, please get in touch and we can discuss the options.
Information provided in this newsletter is general in nature and does not constitute financial advice. Please review our General Advice Disclaimer here: https://bpmfinancial.com.au/general-advice-disclaimer/
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