Gold's astonishing surge + How to build your financial fitness

Hi everyone,

A very chilled week as we prepare for a busy end-of-the year period. Libby and I had our first full weekend at home together without football commitments or family staying with us since last October. I must admit it felt a bit strange at first but we quickly found our groove ... lucky we still get on after 47 years of marriage. 😊

On the financial front there is a bit to chat about, so lets get stuck into it.

In this newsletter:

• Consumers getting wary.

• Rents leap up again.

• Gold bugs are in heaven ... but how long can it last?

• The wider sharemarket boom continues, but be cautious.

• How to have a luxury lifestyle on a budget.

• Why building wealth is a marathon and not a sprint.

• America is scary at the moment.

Consumers are getting wary …

A couple of interesting economic data points came out this week which the Reserve Bank will be watching closely.

In the last few statements attached to the RBA board meeting discussion around interest rates, there have been comments that household spending and conditions have been solid. So this week’s soft consumer confidence figures should attract attention.

Thanks to IFM Investors for this table breaking down the results which show consumer sentiment is down again in October, as are family finances over the next 12 months. There is also a view that economic conditions could deteriorate over the next five years.

And a weakening job market won’t help consumer confidence. Job advertisements are a key indicator of future employment trends, as they reveal whether employers are actively hiring.

Again, the RBA has been consistently commenting on the strength of the labour market and unemployment holding at low levels. Remember the two key pillars of the RBA is to maintain economic growth and keep unemployment low. The latest drop in job ads - to below this time last year - could be a precursor to weaker employment and higher unemployment.

Rents leap up again

Over the last couple of years I’ve scoffed at politicians who have waged war against landlords for being greedy and driving up rents. I warned that making landlords the scapegoat could come back to bite the market and just make the situation worse.

Well, it seems like that is exactly what is happening. It’s not a landlord problem, it's (like the housing crisis) a supply and stock problem. There are less properties available for rent and more renters fighting to grab a property that is pushing up rental prices.

Castigate landlords and change regulations to make it more onerous to operate an investment property, and investors will just look at easier alternative investment options. Yes, governments have the right to change the rules but investors have the right to invest where they want.

Cotality’s seasonally adjusted Rental Value Index saw national dwelling rents post a 1.4 per cent rise in the September quarter. It’s the largest three-month increase since June 2024, and a significant uptick from the 1.1 per cent lift recorded in the June quarter.

On an annual basis, rents are up 4.3 per cent for the year to September compared with the four-year low of 3.4 per cent in the year to the end of May.

Brisbane and Sydney led the uptick in the pace of annual rental growth, up 1.7 and 1.5 per cent respectively compared to June. Adelaide was the only city to see growth ease.

According to Cotality, ongoing scarcity in ‘for rent’ listings, coupled with continued strength in rental demand has pushed the national vacancy rate to a new record low of 1.47 per cent - less than half the pre-COVID decade average of 3.3 per cent.

The number of rental listings is tracking approximately 25 per cent below the previous five-year average nationally for this time of year. Supply is particularly tight in the unit sector - especially in Sydney, which recorded both a new record low vacancy rate across its unit sector and broader dwelling rental market in September.

The median weekly rental value across Australia’s combined capital cities surpassed the $700 mark for the first time in August, before landing at $702 per week in September.

Across the capitals, Sydney remains by far the most expensive rental capital, with the typical dwelling renting for $807 per week, while Hobart maintained its title as the country’s most affordable city to rent in, with a median weekly rental value of $584 per week.

Gold bugs are in heaven ... but how long can it last?

Over the last couple of months, I’ve been talking about the rise in the value of gold. This week the value of the precious metal topped $US 4,000 an ounce and in Aussie dollar terms, it broke through AU$6,000 an ounce.

The below chart tracks the return on gold (the orange line) compared to the US sharemarket (blue line) for the last 30 years. As you can see, it is rare for gold to outperform the US sharemarket ... as it is doing now. The gold price is up a phenomenal 50 per cent this year.

Gold traditionally outperforms during times of financial uncertainty. During and after the Global Financial Crisis, which began in 2007 and continued through to 2010 with uncertainty lingering for a few years after, this was evident in the price of the metal.

I was a cadet business reporter on The Australian newspaper when gold dropped 14 per cent overnight in 1983 and since then I get more than a little nervous when gold has a big run up, because I can remember the big crashes which inevitably follow.

Photos this week of people queueing in the street waiting to get into gold bullion stores worried me.

Like previous surges in the gold price, this one is driven by heightened uncertainty surrounding President Trump’s economic and financial policies - including tariffs, government shutdowns, challenges to the Federal Reserve, and more.

At the same time, central banks have been shifting away from stockpiling US dollars as a store of value, turning instead to gold bullion. Over the past year, they’ve added more than 400 tonnes of gold to their reserves.

For Australia, as one of the biggest gold miners in the world, gold has jumped to become our second biggest export commodity on the back of its price. While our gold miners sell it in US dollars, their costs are in Australian dollars - so they are reaping the benefit of the currency difference.

Make your own call on how long this gold boom will last, but there’s no denying it was a hot topic among analysts on the the ausbiz business and finance streaming network this week.

A major focus of the discussion was spotting listed gold miners and explorers that haven’t yet caught up with the price surge seen by their competitors.

Jonathan Tacadena of MPC Markets pointed to Gorilla Gold Mines (ASX:GG8) as a standout opportunity, citing its strong management, active drilling programs in Western Australia, and a recent capital raise at $0.38 per share. Its current market cap sits between $250 million and $300 million, with Tacadena anticipating a potential upgrade to resources before the year’s end as the next major catalyst. Tacadena views Gorilla Gold Mines as one of the few remaining gold stocks yet to enjoy a full run up in value, estimating upside potential towards the recent high of $0.60 per share and a possible market cap of $400 million to $500 million.

Giuliano Sala Tenna from Bell Potter sees gold as a popular hedge amid ongoing geopolitical uncertainty, interest rate cuts, and persistent US fiscal deficits. Despite the recent rally, Sala Tenna suggests gold may consolidate at current levels before moving higher. He emphasised that many stocks, including Genesis Minerals (ASX:GMD) and Capricorn Metals (ASX:CMM), are not yet pricing in the elevated gold price, presenting a potential upside if bullion remains strong.

Grady Wulff from Bell Direct highlighted Northern Star Resources (ASX:NST) as a top pick, giving it a ‘buy’ rating with a price target of $30. Wulff sees Northern Star as well positioned due to its leading operations, diversified asset base, strong forecasted production growth and a robust balance sheet of $1.5 billion in cash and bullion.

Pantoro Gold (ASX:PNR) is rated a ‘hold’, having upgraded from a ‘sell’ previously due to valuation adjustments and significant financial turnaround. Wulff pointed to a jump in net profit to $66 million in FY25 and improved margins, expecting further enhancement in FY26. The company’s balance sheet remains strong with $176 million in cash and minimal hedging, although higher depreciation costs are forecast to impact earnings.

Wider share boom continues … but be cautious

Timely advice from Lonsec’s Global Equities Manager, Hong Hon, that investors should remain focused on fundamentals and avoid chasing momentum when it comes to investing in the wider market.

According to Hon, valuations - particularly in US tech - are elevated, but strong earnings and ongoing innovation continue to support investor sentiment. The real opportunity, he suggests, lies in balancing exposure across regions and investment styles, especially as value stocks in Europe and Asia have quietly outperformed over the past five years.

Diversification matters: Value and dividend stocks overseas are no longer cheap, and growth stocks aren’t as stretched, suggesting a more balanced portfolio may be prudent.

Concentration risk is real: With nearly two-thirds of global equity value tied to the US, any disruption could ripple globally.

Valuations aren’t the whole story: Historical bear markets have often been triggered by external shocks, not just stretched pricing.

Hon says “disciplined optimism” means recognising that while valuations are a warning light, they’re not a siren. Earnings growth remains solid, and attractive opportunities still exist, especially in sectors and regions that have already reset.

Why building wealth is a marathon, not a sprint

In a world of Afterpay, same-day delivery, and on-demand streaming, instant gratification has become a modern-day expectation.

We are conditioned to get everything we want now, or at least in 24 hours via express shipping. I can understand, then, how hard it is for people, especially young people, to resist the urge to splurge - and save or invest instead.

But as the saying goes, good things are worth waiting for.

When it comes to building wealth, this is absolutely the case. Creating the kind of financial security that lets you live well and retire comfortably doesn’t happen overnight.

The money marathon

The truth is, there are no real “get rich quick” schemes (at least not without significant risk and the possibility of major losses). And while it takes patience and discipline to delay spending today, long-term investing shows that the reward is well worth the wait.

For example, if you invested just $1,000 in the Australian sharemarket and earned an average return of 9.8 per cent per year (based on a historical average), that small amount could grow to over $17,000 in 30 years, thanks to the power of compounding.

I always find it interesting that the people who often end up the most secure in life are the ones who have simply stayed on the sensible money course. They’re financially focused and have built up their financial fitness to go the distance.

5 ways to Improve your financial fitness

It’s never too late to work on your financial health and commit to making smarter money choices.

Even if you feel like you’ve joined the money marathon a little late, that’s OK - what matters is that you start training now. Just like physical fitness, financial fitness is built through consistent effort over time.

Here are five tips to get into better financial shape:

1. Get a money mentor

I am a big supporter of having a ‘money mentor’ - they are like a financial coach - someone who motivates you and keeps you on course.

The person could be a professional financial planner or just someone you respect and admire for their money smarts, like a family member or a finance expert you follow online.

Having a money mentor can help you to plan your financial future, avoid making costly money mistakes and stay focused on your long-term goals.

2. Build up money muscle

Just like you build body bulk by increasing your weight capacity at the gym, you can build up your money muscles over time.

Start with small, achievable financial goals, like building an emergency fund, paying off high-interest debt, or committing to saving a percentage of your income every month.

Then you could ‘add more weight’ such as getting a second job to save for a home deposit, or smash down your mortgage faster. You may also want to engage a financial planner to help you make plans for your lifelong financial security and goals.

But if you are thinking about investing in the sharemarket, just remember the words of the great Warren Buffett - the ‘World’s Best Investor’:

“Most people shouldn’t be active investors.”

By this he means that unless we are very clued up when it comes to share investing, then we are wise to leave it to the professionals who work with money everyday. So low-fee index funds and focusing on avoiding bad investments, rather than trying to find the next big winner is a safer way to grow money.

3. Review and correct

Most financial mistakes are driven by emotion. Fear, greed - even boredom - can lead to poor money decisions.

It’s like stress-spending to feel better. Panic-selling during a market dip, or rushing into a property purchase out of FOMO, rather than making a well-considered decision is the investment equivalent.

Take the time to review your financial behavior, just as an athlete analyses their performance to improve. Often, the most powerful changes come from being honest with ourselves and committing to do better.

4. Stay focused on the finish line

Wealth doesn’t build in days - it builds in decades. The market will rise and fall. Life will throw you curveballs. The key is to stay focused... financial freedom, security, and peace of mind await as long as you keep running and stay on track.

And the entire time you are on track, compound interest is doing just that … compounding.

5. Run at your own pace

It’s easy to compare your financial journey to others but remember, everyone runs a different race.

Some people get a head start through family support or inheritance. Others face setbacks due to bad luck, poor decisions, or broader economic challenges which they can’t control.

You might notice some friends sprinting ahead of you but then come crashing back thanks to taking too many risks with their money.

So focus on running at your own pace. Knowing and respecting your risk profile will help you make decisions you are comfortable with and won’t keep you up at night.

The money mindset

In today’s “buy it now” culture, practicing delayed gratification over instant indulgence is underrated. But this mindset helps us to build wealth over time.

Just remember, ‘slow and steady wins the race’.

Luxury on a budget

The daily financial grind of balancing the family budget can be exhausting - and, at times, gets us all down - especially if you’re a family with a few kids.

But sticking to a budget doesn’t mean you have to deprive yourself of life’s little luxuries. After all, life is for living, and we deserve rewards for all our hard work. The trick is, to plan for them, keep impulse buying in check, and have a savvy strategy.

Two years in the making

A colleague of mine’s wife has done just this. For his 50th birthday she gave him an all-expenses-paid holiday for the two of them to attend the Italian F1 Grand Prix.

She had secretly put away $50 a week for two years to save for this. That and she also hunted down great travel deals.

So yes, it can be done.

Budget for indulgence

You too can save for a little luxury now and then. Sticking to your savings plan will be easier knowing there’s a reward at the end.

By budgeting for them, you’ll be able to afford some luxuries like dining out, non-essential shopping, or holidays - and treat these items as part of your regular expenses.

Here’s how.

Be a bargain surfer

Luxury products and experiences don’t have to come with luxury price tags. Surfing the internet makes it much easier to track down the best deals on everything. For instance:

Travel deals

• House swap: Websites like homeexchange.com and aussiehouseswap.com.au offer platforms for people to list their homes and swap with other like-minded families. If you live in the city, consider swapping with someone in the country or on the coast - and vice versa. A big plus: you get access to a kitchen, which saves on eating out.

• Chase the best currency conversion: If you want a luxury holiday, choose a country where your dollar stretches further. Asia and Pacific destinations such as Vietnam, Cambodia or Tonga often offer great value due to currency exchange rates.

• Travel off-season: Visit destinations when hotels and restaurants aren’t full, and discounts are plentiful. Shoulder seasons still offer good weather, but better value.

• Use credit card rewards: If you’ve always dreamed of flying premium economy or business class, use your credit card points to make it happen - just be prepared to pay those pesky taxes.

• Always ask for an upgrade: There’s no harm in trying! We have a relative who claims it’s their wedding anniversary at every hotel - and they often score a free bottle of wine or a room upgrade. (Tip: don’t say it’s your birthday - they might check your passport.)

• Book the cheapest room in a good hotel: Whether you're in a suite or a small room, the pool, spa, restaurant, and hotel amenities are the same. Most people don’t go on holidays to spend all day in the room, anyway.

Luxury secondhand products

• Use online marketplaces: Gumtree and eBay have bargains on everything from strollers to televisions - often in mint condition.

• Buy used or older model cars: New cars lose value the minute they leave the dealership - up to 50 per cent in the first five years. Check out sites like carsales.com.au and drive.com.au for deals.

Coupons for luxury

• Don’t be embarrassed to use coupons: They save money on everything from dining out to dry cleaning. Keep them in your wallet or near the front door so you remember to use them.

• Look for online coupon codes: Before making any online purchase, do a quick search for a coupon code. Just type the product name plus “coupons” into your search engine and see what pops up.

Save on fashion

• Buy less, but better: Invest in a few high-quality pieces that last and look great, rather than loads of cheap items that wear out quickly.

• Buy secondhand: Op shops and online resale platforms often have designer and high-end clothing at a fraction of the original cost. Hunt for brands you know and love.

• Rent a great outfit: Men have been renting tuxedos for years - now women can rent designer dresses from websites like GlamCorner or The Volte. Look amazing for $100 instead of spending $500–$1000.

• Embrace costume jewellery: Diamonds may be a girl’s best friend, but cubic zirconia looks just as good - and is far more budget-friendly. There’s a huge range of high-quality costume jewellery available.

Gourmet groceries

• Buy fancy ice cream at the supermarket: Instead of spending $6 on a scoop at a specialty store, grab a premium litre from the supermarket. It’ll cost about the same and last the whole week.

• Shop at the local farmers’ market: Great quality, great value, and a great outing. Make it a weekend tradition.

• Grow your own herbs: Fresh herbs take home-cooked meals to the next level. Basil, mint, and parsley can thrive on a windowsill or balcony.

• Buy in bulk: Stock up on costly or organic groceries by buying in bulk from markets - you’ll save money in the long run.

America is eating itself

When I look from afar at what is happening overseas, particularly in the US, I am increasingly grateful to be living in this country.

Case in point:

A new poll shows 30 per cent of Americans believe violence may be necessary to get the country back on track - this is up 11 points since the question was asked in April 2024. Democrats had the largest increase - from 12 to 28 percent, while Republicans inched up to 31 percent.

The survey follows high-profile incidents of political violence like the assassination of Charlie Kirk, the shooting of two Minnesota legislators, and attacks on federal officials and facilities. National Guard deployments in major cities have also sparked anxiety and confrontations.

The uptick in violent rhetoric has many hoping the data signals an erosion of civic confidence rather than a literal call to arms.

There is also the view that the latest opinion polls suggest the average American is not agreeing with President Trump’s policies. For instance:

• 60 per cent of adults say the country is on the wrong track, with pessimism increasing between August and September.

• While a majority (54 per cent) continue to support deporting immigrants illegally in the country, 53 per cent believe the process of deporting people hasn’t been fair. 52 per cent disapprove of Trump’s handling of immigration and 51 per cent think his actions have gone too far. 42 per cent also believe the government is deporting the wrong people.

• 80 per cent of Americans are concerned about government shutdowns, with a greater share placing the blame on Trump.

• 58 per cent of Americans believe that Trump should deploy armed troops only in response to external threats. Meanwhile, 48 percent say presidents should not be able to send troops into a state over the objection of its governor, compared to 37 percent who believe they should.