‘No clarity on gold equity correlation breakdown’

The co-manager of the £63m S&W Global Gold and Resources fund said the gap between high gold and low gold equity prices remained at levels last seen in 2001 and 2008.

This comes after the sovereign debt crisis has dampened market sentiment, pushing equity markets lower and triggering an investor flight into physical assets such as gold which are viewed as safe havens.

Ms Markova said: “We hope to see the gap between gold equities and the gold price close. It has been this wide before in both 2001 and 2008, but it can takes 12-18 months for investors to get acquainted to the new step change in inputs. People aren’t putting a gold price as high as it is now into their equity models.”

The downturn in investor sentiment last year that sent equities into negative territory sent gold prices 29.5 per cent up from $1,342 (£847) an ounce on February 3 2011 to $1,738 an ounce 12 months later.

The price peaked at $1,896 on September 5 following the summer’s selloff in equity markets.

Ms Markova said she remained confident that the price of gold could exceed $2,500 an ounce. This led Ms Markova and co-manager Robert Lyon to increase their exposure to physical gold to the fund’s 10 per cent maximum in November.

This position was adopted through an investment in the Central GoldTrust alongside a core long-term holding in the Central Fund of Canada.

At the end of January this had been pulled back slightly to 9.4 per cent.