Choose oil over gold for diversity: Wilson Asset Management
The fund manager's Damien Boey said it would be foolhardy to believe gold is an uncorrelated asset.
Despite the unrelenting lines at Sydney's Martin Place for gold from ABC Bullion, the precious metal is actually a correlated asset and oil is a better diversifier, according to Wilson Asset Management (WAM).
Gold prices have surged about 67% over the past year on uncertainty, geopolitical and inflation fears. Investors have been using the asset class as a flight to safety and as part of their alternative bucket as, historically, it has been uncorrelated to stocks and bonds.
But WAM portfolio strategist Damien Boey said gold is now correlated with other asset classes as the financial system becomes more complex. He believes markets are at “peak correlations”.
With equities and bonds becoming more and more correlated, Boey said “it would be pretty foolhardy to believe that those issues or correlation risk would just be confined to those two asset classes”.
