Gold investors could benefit in long-run: Investec

Bradley George and Daniel Sacks, co-portfolio managers of the Investec Global Gold fund, said the long-term floor for gold prices was likely to be $1,000 (£653) per ounce.

The managers said the recent International Monetary Fund's plans to sell 191.3 tonnes of gold bullion on the open market under the Central Bank Gold Agreement had put pressure on prices from percieved lack of demand.

However, the managers said the publicity attached to large purchases of gold - particularly given the Indian central bank's purchase last year - may have impacted on the level of interest.

"Instead they may be pursuing a strategy of steady accumulation over time in the secondary market," the managers said.

The portfolio managers also highlighted the physical gold market, noting recent strong demand from jewellery fabrication industry, pushing prices up.

The recent fluctuations in the euro was unlikely to have a longer term impact on the price of gold, according to the managers, as it is linked to the Greek deficit rather than bearishness on the single currency.

However, the managers warned of the headwinds facing the commodity, particularly from political and fiscal policies.

The managers added: "In theory, the longer-term impact of President Obama's bank proposals on gold may be negative.

"Passage of his proposed legislation could curtail the volume of commodity trading, which on balance is likely to be negative for gold."

The managers said actual and anticipated monetary tightening in China had coincided with gold price declines during 2010, and suspected further tightening could trigger similar declines.

Yet, if a proposal by the Australian government to scrap state-based royalty taxes on mining projects in favour of a uniform national resource rent tax - raising more revenue - were to discourage marginal gold production, gold prices could rise.

The managers added: "We believe the result of January's US Federal Reserve Open Market Committee meeting is more bullish than bearish for bullion going forward.

"Although the outlook for inflation is stable according to the Federal Reserve's statement, we believe the reaffirmation by the Federal Reserve that rates are likely to remain low for an extended period, which should be supportive of gold prices in the long term."