SINGAPORE (July 1): Post-Brexit, gold continues to hold on to gains despite a recovery in risky assets like equities. The precious metal, which is seen as a safe haven asset, has risen 25% this year and trades close to US$1,330 per ounce – a level last seen in July 2014. So should investors jump in or stay pat?

“Gold remains an under owned hedge against global central bank credibility and under-appreciated global risks, particularly from China,” say Mark Lacey and James Luke, fund managers at UK-based Schroders, in a Thursday report. “Within the gold investment universe, gold equities in particular offer a compelling investment case and we believe are likely to outperform the gold price in coming years.”

Five open-ended equity funds available for sale in Singapore offer direct exposure to gold stocks (see table below). These funds have gained 82% on average this year, easily outperforming spot gold. The funds are led by the $381 million Investec GSF Glbl Gold A Acc USD fund, up 86.4%; the $114 million Deutsche Noor Precious Metals Secs A fund, up 85.9%; and the $248 million Franklin Gold & PM A Acc USD fund, up 84.6%.

Note: Data sourced from Morningstar Direct. Returns as at June 30  and in Singapore dollar terms

Apart from gold, other safe haven assets include the Swiss franc and Japanese yen. But central bank intervention could cap their gains, according to the World Gold Council. This makes gold unique as it does not carry “intervention risk”.

Immediately following Brexit, Switzerland’s central bank moved to intervene in the foreign exchange markets to weaken the franc. Market observers expect a similar move by the Bank of Japan moving forward as the yen has strengthened nearly 17% against the US dollar this year, hurting the export-dependent country.  

For a more detailed write-up on gold funds, refer to Personal Wealth Issue No. 725 (April 25-May 1)