Unsettling Times - What to Buy?

Over the last 7 years, Gold has had a significant run, increasing from a 2018 low of $1,160 to a high of $3,500 USD in April 2025.

This represents an increase of approximately +200% over the 7 year period, with a +115% gain occurring over only the last 3 years alone.

But is Gold ‘low risk’ at these dizzy heights, and is this the only option going forward?

Where do Investors typically turn in uncertain times?

Well, very generally speaking investors typically seek financial refuge in:

• Gold

• USD

• Bonds

Going back to basics, anything other than cash (including basic savings accounts etc), Gold & and (short term maturity) govt bonds are RISK assets.

There is a time and a place for exposure to risk assets, and there is a time and a place for limiting exposure to risk assets whilst prioritising allocation towards ‘low risk’ asset types.

Here’s the kicker - Doing so properly can yield explosive returns within ‘safety assets’.
Gold is an example of this…But what about Bonds?

Bonds you say? Tell me more…

Bonds haven’t been ‘cool’ since the days of 2018/2019.

2020 onwards has been a period of unprecedented inflation and rising interest rates… Hence the favouritism of investors toward Gold and not Bonds.

It has well and truly been an era of risk assets with stock markets and values of all kinds experiencing unprecedented gains…

But are tides turning, and are bonds worth considering?

Bonds basics…

Here’s what you ‘need to know’ about (treasury) bonds…

Very basically, (treasury) bonds are vehicles Governments use to raise money. When issued, they are a promise to repay the principal at a certain date, with a promise of regular payments of (fixed) interest on those funds commonly referred to as coupons.

You can buy actual bonds, or bond ETFs which allow you to enter and exit at will.
Both facilitate dividends/coupons yields.

The Different Types of (Treasury) Bond ETFs…

• Shorter term maturity Bond ETFs, such as 1-3 year Treasury Bonds

• Mid-term maturity Bond ETFs, such as 3-7 year Treasury Bonds

• Longer-term maturity Bond ETFs, such as 10-20 year Treasury Bonds

What’s the difference between them?

Shorter the maturity, the lower the volatility/fluctuation of the capital value/investment.

Longer the maturity, the higher the volatility/fluctuation of the capital value/investment.

How changes in interest rates affect Bonds…

• If Interest rates go up? The fixed interest amounts associated with existing bonds are now less appealing. (Existing) Bond prices typically go down.
  

• If Interest rates go down? The fixed interest amounts from existing bonds issued at higher rates are now more appealing. (Existing) Bond prices typically go up.

So…When are Bonds most useful?

In the past, Bond (ETFs) have been most strategic in the following scenarios:

• During periods of Economic uncertainty

• When Interest rates are expected to fall

Beware mindful however…The Enemy of Bonds is Inflation.

Recap of how Bonds performed during Covid…

Uncertainty drove bond prices higher at the onset of covid.

Huge stimulus packages caused huge inflation around the world.

High Inflation = Increased likelihood of Interest rate increases.

Australian Central Bank began increasing rates at the end of 2021 to help reduce inflation.

The U.S. Fed began a series of rate hikes in early 2022, moving the cash rate from 0.33% in April 22 to 5.33% in August 2023 to combat inflation.

Bond prices have since recovered from 2023 lows thanks to no further increases to the cash rate and with inflation somewhat under control making further increases less likely and therefore by default making interest rate cuts more likely to eventuate over time.

How are Bonds looking right now?

Recent uncertainty driven by global events such as Trade Wars and the conflict in the Middle East have contributed to the initial recovery of bond prices.

As these events unfold, Bonds may be continued to be favoured…but time will tell.

Stay tuned for further updates…

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