00:00Smart gold prices have climbed above $4,000 an ounce for the first time.
00:05That's as concerns over the U.S. economy add fresh momentum to a scorching rally.
00:10Bullion has now jumped more than 50% this year in the face of rising trade and geopolitical uncertainties.
00:16Let's get more with St. James Place Asia and Middle East CIO Angelina Lai.
00:21Angelina, we heard from Ray Dalio. He says it's a great diversifier.
00:25It is a better haven play than USD. Can you agree?
00:28I'm not sure that we do, actually.
00:32So he's absolutely right. Gold has done extremely well, particularly when market goes down.
00:37He has also been a very interesting inflation hedge.
00:40We've done a lot of tail analysis, i.e. when market goes down, how do gold sort of fare in comparison, particularly also with equity market.
00:50And what we actually have found is probably around 70% to 80% of the time it does do OK or do quite well.
00:57But it doesn't always give that diversification.
01:00And actually, correlation between gold and equity market tend to be around 50% to 60% positive.
01:06So it's not the greatest diversifier that people tend to think that it is.
01:11Coming back to the precious metals, actually, quite interestingly, so this year and actually probably for the last few years, gold has been sort of the golden child, if you will.
01:20With year to date returns around 52% so far.
01:25But did you know that silver is actually up 65% and platinum 85%?
01:30So really what we are really seeing is a flight to safety.
01:35We tend to talk about gold as a forward indicator for the fear and greed index, actually, because there is no cash flow attached to gold.
01:43And for an organization such as us that believes in valuation and fundamentals as a basis, it's extremely difficult to value something like a gold, which does not have cash flows attached to it.
01:55So fundamentally, what you're really looking for is what is the next investor, when you're ready to part with your gold, willing to pay for that gold.
02:04And therefore, it is an interesting diversifier as potentially a small percentage of your portfolio.
02:11But what we're really looking at is, in general, within the market space, with all of the assets, what is actually the best opportunity at the moment?
02:18Where to for gold?
02:19Because when you take a look at key indicators, they suggest there is a lot more momentum.
02:24What assumptions are you making about gold prices and how much gold should you have in your portfolio?
02:30Some say a maximum of 10%.
02:33Well, so that's an interesting one, because Ray Dalio's one, Bridgewater, actually, he had written some thesis paper, actually, based in sort of 1970s and 1980s.
02:42And when he looked at how sort of gold fared with market, we've since had significantly more market data.
02:50And to some of the analysis that we have done, we do tend to find that a small percentage could be interesting during tail risks.
02:58But actually, what we're really seeing at the moment is that, certainly from a valuation perspective, which I did explain is our process, it doesn't really add that much opportunity.
03:11So rather, from a mathematical perspective, because gold value is so high at the moment, we actually see the future potential of gold rising at the level that it has done much, much less likely.
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