In a global health crisis, it pays to know where the safe haven assets are to help shield your losses.

Since the market selloff commenced in earnest last week, gold and US treasuries — two safe-haven stalwarts — have both performed as advertised.

That said, gold prices haven’t been spared from all of the volatility as markets remain choppy.

After holding its ground last week while equities slumped, prices for gold dipped sharply on Friday night.

So there’s been some interesting price action as market conditions become more complex amid the selloff. And that has implications for investors and the many ASX-listed small caps which operate in the space.

To discuss the outlook Stockhead caught up with Jordan Eliseo, gold expert and senior investment manager at the Perth Mint.

While the precious metal has found demand in the market mayhem, Eliseo pointed out that its run of outperformance commenced back in December 2018.

Back then, concerns about the ongoing pace of rate hikes by the US Fed sent US stocks falling 20 per cent from their highs.

But as the Fed tapped the brakes (cutting rates) and bond yields fell, gold didn’t lose its gains — even as equities rallied. And that lack of an easily explainable causal link is what makes gold a “unique commodity”, Eliseo said.

“Gold’s performance over this entire time period reinforces that fact. It showed a rising correlation to equities when equities rallied, and a negative correlation when equities fell.”

Last Friday though, things got choppy for the precious metal as gold prices (in USD terms) fell almost four per cent even though equities were being sold off.

However, Eliseo attributed the move to market forces. Despite some day-to-day volatility, investors should expect gold to remain as an efficient store of value if the global equity selloff accelerates.

“The pullback in the gold price on Friday 28th was largely driven by forced selling, as investors liquidated gold positions to cover losses in other parts of their portfolio,” Eliseo said.

In that sense, it was “reminiscent to the price activity seen during parts of the Global Financial Crisis — after which gold rocketed higher”.

“I think in the short-term, the price outlook is somewhat uncertain. But further out, the market fallout from the coronavirus should be supportive of precious metals,” Eliseo said.

“Firstly because will necessitate easier monetary policy, and also because it will have negative implications for economic growth and corporate earnings.”

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And in that environment, investments in gold and US Treasuries can be considered something of a “free kick”, VFS Macro’s James Whelan told Stockhead last week.

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“It’s important to remember that gold has been in a sustained bull run since Q4 2018, — it’s up more than 30 per cent since then,” Eliseo said.

“That price rally has been accompanied by record ETF purchases. Central banks globally have also been increasing their holdings. So investors are increasingly attracted to gold given the negative real yields on cash and a lot of government bonds.”

We asked Eliseo to compare gold to another asset that some consider to be a commodity and store of value in its own right; Bitcoin.

But he remains more circumspect on the ability of cryptocurrency to attract capital in a market selloff.

Since stock market volatility around the world surged at the start of last week, Bitcoin prices have slipped from around $US10,000 to around $US8,900 at the time of print.

“Whilst gold and Bitcoin are often compared to each other, it’s still far too early in Bitcoins life cycle for the market as a whole to see it as a reliable safe haven asset,” Eliseo said.

“That’s not to deny its potential, but it remains a fact that Bitcoin does not have the multi-millennia track record of preserving value in times of crisis that gold does.”

“Bitcoin also doesn’t have the market size, depth or liquidity of the gold market, all of which are important characteristics of safe haven assets.”

“So I think most investors are still likely to turn to gold and other assets like US Treasuries in times of uncertainty.”

So if coronavirus fears spark my panic selling of stocks in the months ahead, investors can be reasonably assured that gold will offer some protection to the portfolio.

And those returns are likely to be higher in Aussie dollar terms, given the AUD is often valued as a proxy for global risk appetite. If stocks fall sharply, the AUD will almost certainly take a hit.

“Given the ongoing economic, financial market and geopolitical uncertainty, demand for the yellow metal is likely to be well supported throughout 2020,” Eliseo said.

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