Should you buy ASX gold shares or FAANG stocks in August?

Both ASX gold shares and FAANG stocks have rocketed higher in 2020, so which one will be a better buy after the August reporting season?

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Both FAANG stocks and ASX gold shares have outperformed in 2020. But which one is better for investors chasing strong capital gains?

Should I buy FAANG stocks?

I think your views on the August earnings season will largely make the decision for you here.

If you're bullish on the tech sector to continue its gains, then FAANG stocks seem like an obvious answer. While you can't buy these shares directly on the ASX, there are some exchange-traded funds (ETFs) on the ASX that provide exposure to FAANG stocks. 

One option is ETFS FANG+ ETF (ASX: FANG) which has concentrated positions in a handful of United States and China-based tech companies.

The other option is to buy a broad-market, US ETF like BetaShares NASDAQ 100 ETF (ASX: NDQ). FAANG stocks make up a huge proportion of the US market which means this ETF could be an easy way to tilt your portfolio towards US tech.

What about ASX gold shares?

There's no doubt ASX gold shares have been a good buy this year.

The Saracen Mineral Holdings Limited (ASX: SAR) share price is up 83.1% as gold prices have surged.

That's despite a 2.4% drop yesterday in this ASX gold share as investors priced in the new Victorian lockdown restrictions and economic impacts. 

The St Barbara Ltd (ASX: SBM) share price is up 26.0% in 2020 while Northern Star Resources Ltd (ASX: NST) shares have climbed 39.8%.

Of course, those that bought in the March bear market have done well. However, if we see more market volatility in the months ahead, ASX gold shares could climb even higher.

This month sees many top ASX companies report their full-year or half-year earnings. That means investors will be watching closely to get a gauge on the health of the Aussie economy right now.

If you think we're in for more short to medium-term pain, ASX gold shares could be a good way to hedge against further drops in the S&P/ASX 200 Index (ASX: XJO).

Foolish takeaway

There are no guarantees in investing. But naturally, we expect to see some good, long-term returns for taking on investing risks.

Both FAANG stocks and ASX gold shares have performed well this year. Right now, no one knows which one will outperform by the end of 2020 or beyond.

However, I think the August earnings season that's kicking off this week and next may provide us with a pretty good indication. 

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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