Amid global macroeconomic uncertainty, precious metals like gold and silver are poised for potential growth, driven by the U.S. Federal Reserve's rate cycle. A cut in the Fed Funds Rate could lower real interest rates, historically supporting precious metal prices.
Gold and silver have been consolidating after reaching lifetime highs earlier this year. Silver, known for its dual role as a monetary metal and industrial commodity, presents higher volatility compared to gold. Investors are advised to use the gold-to-silver ratio to make tactical allocation decisions. When the ratio is closer to 50, gold is cheaper, whereas a ratio above 85-90 indicates silver is undervalued.
A strategic allocation of 12-15% to precious metals is recommended for institutional-grade portfolios to mitigate risks amid geopolitical and inflationary pressures. This allocation provides diversification, given gold's low correlation with equities and fixed income.
The 360 ONE Multi Asset Fund manages its commodity allocations, including precious metals, within a 25-40% range. Decisions to adjust allocations are based on asset valuations, inflation, and global macro signals, ensuring changes are grounded in fundamentals.
Investors choosing between gold/silver ETFs and multi-asset funds should consider their objectives. ETFs offer direct exposure and lower costs, while multi-asset funds provide diversified wealth creation managed by professionals.
Background
Gold and silver have historically been seen as safe-haven assets during times of economic uncertainty. The current macroeconomic environment, characterized by geopolitical tensions and inflation concerns, makes precious metals an attractive option for diversification.
With supportive macro conditions, gold is likely to revisit its peak levels within the next 12 months. Investors may use the current consolidation phase to gradually increase their exposure to gold.
