For Shaokai Fan, head of APAC ex-China at the World Gold Council (WGC), gold stands out as a portfolio diversifier, particularly for Australian investors.

Speaking to InvestorDaily, Phan explained that unlike other commodities, gold’s performance is not closely linked to the economic cycles of commodity-producing countries such as Australia.

“Australia is a big commodity producing country so there is a sense or belief that the Australian economy, the Australian dollar, will be more in sync with commodity cycles and therefore buying an asset that most people think is a commodity may not be beneficial because it will be aligned with Australia’s economic cycle,” Fan said.

"But one of the messages we're trying to send out there is that yes, of course Australia is a very large producer of gold, but the performance of gold, the financial behavior of it is actually very different to other commodities, in fact to many other assets overall, and this is one of the most attractive elements of owning gold in your portfolio.

"The behavior is so different from equities, fixed income, commodities, even cryptocurrencies that owning gold helps bring diversification benefits to your portfolio and can help improve long-term risk-adjusted returns."

Gold's unique diversification benefits stem from its ability to perform well in both pro-cyclical environments – where demand for jewelery and industrial use increases during economic growth – and counter-cyclical scenarios where investment demand increases during times of market uncertainty.

This duality makes gold relatively uncorrelated with other asset classes, providing significant diversification benefits, Fan explained.

"You have a very mixed bag in terms of the different demand factors that affect gold and that leads to a very idiosyncratic performance of the gold price," he said.

“This makes the price of gold relatively uncorrelated with other asset classes. Stocks are generally pro-cyclical – when times are good, stock prices go up. Fixed income, generally speaking, is countercyclical.

“Gold is a combination of the two and therefore the price doesn't really correlate that much with anything else. It gives you excellent diversification benefits because it performs so differently from everything else.”

When comparing gold to cryptocurrencies like bitcoin, Phan acknowledges some superficial similarities, such as limited supply and their appeal as alternatives to fiat currencies.

However, he argues that the two assets are quite different.

“There are some very clear examples of how different these asset classes are. The day Russia invaded Ukraine—a high-risk event, certainly one that most people did not foresee—the price of gold predictably went up because gold is a safe-haven asset. It usually goes up when there is market turmoil,” Phan said.

"[But] the price of bitcoin dropped significantly. So if you want to say it's digital gold, it's certainly not a hedged asset, don't present it that way.”

Oil, another commodity often compared to gold, also shows big differences.

Fan pointed out that oil supplies are more vulnerable to geopolitical shocks given the concentrated production regions, while gold's global production base makes it less susceptible to such disruptions.

"We have analyzed this. The correlation between them is very low and it makes sense when we think about it from a fundamental level, from a supply side for example,” Fan said.

"Oil is produced in certain areas of the world where either a conflict or a blockade or some kind of geopolitical turbulence can stop or disrupt that supply, so that has a very clear supply shock, as we've seen both in recent years and historically.

“Gold is mined on every continent except Antarctica, so supply is much less susceptible to a specific supply shock. Russia, for example, was sanctioned after the invasion of Ukraine and is actually the third or fourth largest producer of gold – but that didn't really send a big shock to the gold market.”

Furthermore, while oil serves primarily economic functions and has limited countercyclical uses, gold retains its intrinsic value, with a significant portion of its supply coming from recycling.

The differences between these three assets underscore the importance of understanding their unique characteristics, Robin Tsui, APAC gold strategist at State Street Global Advisors, recently highlighted.

"We've found that oil has historically been a better hedge against inflation, I think that's why we advise clients to have both." You have a strategic allocation to gold as a hedge against market risk, but then you have some sort of allocation to oil and other commodities to provide that inflation hedge,” Tsui told InvestorDaily earlier this month.