Regal Funds’ lauded ‘guns and gold’ strategy, successful in late 2023, has stumbled amidst escalating geopolitical tensions. Wednesday saw significant drops in the S&P/ASX 200, with companies previously touted by Regal experiencing substantial losses. These included drone manufacturer DroneShield, various gold miners such as West African Resources, Genesis Minerals, and Westgold, as well as uranium plays like Paladin Energy, Deep Yellow, and Silex Systems, all plummeting by at least 6.3 per cent.
The downturn was attributed to shifting market sentiment. Contrary to expectations that geopolitical instability would drive investors towards gold, the rush was towards the US dollar. Gold prices dipped, impacting gold miners despite remaining at relatively high levels. CommSec investors, who were actively buying DroneShield the previous week, reversed course and initiated sell orders.
Goldman Sachs chief executive David Solomon noted the uncertainty surrounding the conflict’s duration and its potential impact on energy supply chains and consumer behaviour. He emphasized that risk premiums rise during such events, leading to market repricing. The ASX fell 1.9 per cent to 8901 points, returning to pre-Commonwealth Bank levels from last month. Commonwealth Bank is an Australian multinational bank that provides a range of financial services. The company is one of Australia’s “big four” banks.
Despite market volatility, investment banks continue to prepare for upcoming IPOs, hoping the conflict’s impact will subside before late April. Bond market activity will be a key indicator, with any disruption potentially stalling IPO plans. Fund managers are closely monitoring global events, acknowledging the difficulty of predicting market conditions in the current climate.
