The fund manager remains positive on the outlook for gold and believes ongoing market volatility will provide opportunities to acquire small-cap stocks in promising sectors.
Despite the Reserve Bank of Australia (RBA) initiating a rate-cutting cycle this year, the recent decision to hold cash rates steady has done little to bolster consumer sentiment, said co-portfolio manager at SG Hiscock, Phillip Li.
“Consumers are still cautious, and their depleted savings [are] not encouraging,” he said.
According to Li, this continued hesitance is translating into a challenging environment for businesses reliant on discretionary consumer spending.
Li said such companies are facing pressure from escalating costs, especially on wages and rent. At the same time, he observed that greater promotional efforts are now required just to maintain previous sales volumes and revenue.
Meanwhile, Li said businesses exposed to tariffs face additional challenges.
“The market will be watching closely to see where those costs will be absorbed along the supply chain, and whether management can offset them through pricing, cost discipline or new revenue streams,” he said.
However, despite the current market downturn, Li maintained a strong conviction in the long-term prospects of gold, viewing the dip as a strategic entry point to enhance holdings in precious metals.
Gold achieved exceptional growth of 26 per cent in the first half of this year, which the Gold Council attributed to a weaker US dollar, persistent geopolitical risk, robust investor demand, and continued central bank purchases.
The council predicted the future performance of the shiny metal would largely be shaped by trade tensions, inflation dynamics, and monetary policy through the rest of the year.
Li attributed the recent underperformance of Australian gold miners – down 12 per cent relative to the VanEck Gold Miners ETF (GDX) – to a pre-announced GDX index transition set to take effect on 19 September.
“This change, from the NYSE Arca Gold Miners Index to the MarketVector Global Gold Miners Index, will result in the exclusion of most ASX-listed producers,” he said.
He said the resulting capital outflows have created attractive entry points, shifting towards compelling mid-cap opportunities.
“With the gold price holding up and production growth in focus, we see upside in a few select names with a track record of strong operational performance and good capital discipline,” he said, noting Emerald Resources (ASX: EMR) and Vault Minerals (ASX: VAU) as examples.
Li said outlook commentary would drive sentiment around margin resilience and demand extending into FY2025–26.
Regarding the Australian small-cap market, Li’s advice to investors was to think long-term, viewing market volatility not as a deterrent, but as a strategic time to acquire shares in promising sectors and companies at more attractive valuations.
“Historically, some of the best days in the market tend to occur during or shortly after the most volatile periods, and missing just a handful of those days can meaningfully erode long-term returns,” he said.
At the same time, he said that rather than trying to time the market, preparation is key.
“We keep an eye on companies that we would like to add to the portfolio and use volatility as a time to buy into these opportunities at more compelling valuations,” he said.
